Completion Report

Project Number: 29236 Loan Number: 1609 December 2008

Nepal: Community Groundwater Irrigation Sector Project

CURRENCY EQUIVALENTS

Currency Unit – Nepalese rupee/s (NRe/NRs)

At Appraisal At Project Completion 10 September 1997 31 July 2007

NRs1.00 = $0.0170 $0.0154 $1.00 = NRs58.77 NRs64.90

ABBREVIATIONS

ADB – Asian Development Bank APP – Agriculture Perspective Plan CIDA – Canadian International Development Agency DOA – Department of Agriculture DOI – Department of Irrigation EIRR – economic internal rate of return FIRR – financial internal rate of return GFO – groundwater field office ha – hectare km – kilometer MOF – Ministry of Finance MOLD – Ministry of Local Development MOWR – Ministry of Water Resources NGO – non-governmental organizations NRB – Nepal Rastra Bank O&M – operation and maintenance PMU – project management unit PFI – participating financial institution SDR – special drawing rights STW – shallow tubewell t – metric ton WUA – water user association WUG – water user group

NOTES

(i) The fiscal year (FY) of the Government ends on 15 July. FY before a calendar year denotes the year in which the fiscal year ends, e.g., FY2008 ends on 15 July 2009.

(ii) In this report, "$" refers to US dollars.

Vice-President X. Zhao, Operations Group 1 Director General K. Senga, South Asia Department (SARD) Director B. Hitchcock, Country Director, Nepal Resident Mission (NRM), SARD Team leader G. Gewali, Senior Project Implementation Officer, NRM Team members M. Shrestha, Assistant Disbursement Analyst, NRM

R. Tuladhar, Assistant Project Analyst, NRM

CONTENT

Page

BASIC DATA i

MAP v

I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 2

A. Relevance of Design and Formulation 3 B. Project Outputs 4 C. Project Costs 5 D. Disbursements 6 E. Project Schedule 6 F. Implementation Arrangements 7 G. Conditions and Covenants 7 H. Related Technical Assistance 8 I. Consultant Recruitment and Procurement 8 J. Performance of Consultants, Contractors, and Suppliers 9 K. Performance of the Borrower and the Executing Agency 9 L. Performance of the Asian Development Bank 10

III. EVALUATION OF PERFORMANCE 10 A. Relevance 10 B. Effectiveness in Achieving Outcome 11 C. Efficiency in Achieving Outcome and Outputs 11 D. Preliminary Assessment of Sustainability 12 E. Impact 12

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 13 B. Lessons 13 C. Recommendations 14

APPENDIXES 1. Design and Monitoring Framework 16 2. Number of Shallow Tubewell Installed and Area Irrigated 19 3. Farm-to-Market Roads Improved 20 4. Participating Financing Institutions and Credit Delivery 21 5. Partner Non-Governmental Organizations 22 6. Key Training Provided and Participants 23 7. Vehicles and Equipment Procured and Assigned 24 8. Planned and Actual Expenditures by Source, Category and Component 26 9. Cumulative, Annual and Quarterly Loan Disbursements 27 10. Original and Actual Project Implementation Schedules 31 11. Status of Compliance with Major Loan Covenants 33 12. Technical Assistance Consulting Services 39

13. Major Contracts in Road Improvement Works 40 14. Financial and Economic Analysis 42

BASIC DATA A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report

Number

NEPAL 1609 Community Groundwater Irrigation Sector Project Government of Nepal Department of Irrigation SDR21,902,000 NEP 1049

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years) 8. Terms of Relending (if any) – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

10 September 1997 22 September 1997 29 October 1997 29 October 1997 26 February 1998 17 November 1998 15 February 1999 3 March 1999 One 31 July 2005 21 January 2008 Two 1% Service Charge 40 10 Not Applicable

9. Disbursements a. Dates Initial Disbursement

25 June 1999

Final Disbursement

21 January 2008

Time Interval

8.6 Years

Effective Date

3 March 1999

Original Closing Date

31 July 2005

Time Interval

6.4 Years

b. Amount (SDR ‘000) Category or Subloan

Original Allocation

Partial Cancellations

Last Revised

Allocations

Amount Disbursed

Undisbursed Balance

Civil Works 6,403 4,621 1,782 1,782 0 Vehicle and Equipment

847 499 348

348 0

Office Rental 131 76 55 55 0 Training and Workshops

1,971 1,311 660 660 0

Provision of Credit 9,929 7,747 2,182 2,182 0 Incremental Adm. Cost

1,891 110 1,781

1,781 0

Service Charge 730 563 167 167 0 Total (SDR) 21,902 14,927 6,975 6,975 0

Total (US$ Equivalent)

30,000 21,781 10,161 10,161 0

10. Local Costs (Financed) - Amount ($’ 000) 5,716 - Percent of Local Costs 56 - Percent of Total Cost 41 C. Project Data

1. Project Cost ($ ‘000) Cost Appraisal Estimate Actual

Foreign Exchange Cost 15,400 6,160 Local Currency Cost 27,400 11,789 Total 42,800 17,940

2. Financing Plan ($ ‘000) Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 5,350 3,230 ADB Financed 30,000 9,920 Other External Financing 7,450 4,550

Total 42,800 17,700

ii

IDC Costs Borrower Financed ADB Financed 240 Other External Financing

Grand Total 42,800 17,940 ADB = Asian Development Bank, IDC = interest during construction.

3. Cost Breakdown by Project Component ($ ‘000)

Component Appraisal Estimate Actual Part A Community STW Development 2,800 3,100 Part B Improvement of Farm-to-Market Roads 12,600 4,330 Part C Provision of Credit 17,000 4,132 Part D Implementation Assistance and Institutional Strengthening

9,400 6,138

Service Charge 1,000 240 Total 42,800 17,940

4. Project Schedule

Item Appraisal Estimate Actual Date of Contract with Consultants 25 August 1999 22 December 1999Completion of Engineering Designs 15 July 2000 16 October 2002Civil Works Contract Date of Award 18 March 2000 12 April 2000 Completion of Works 16 August 2005 15 May 2007 Equipment and Supplies Dates First Procurement 15 August 2000 16 October 2000 Last Procurement 22 March 2003 24 April 2005 Completion of Equipment Installation Start of Operations Completion of Tests and Commissioning Beginning of Start-Up Other Milestones

1st Extension of Loan Closing Date 24 June 2005

2nd Extension of Loan Closing Date 27 July 2006

1st Partial Cancellation 10 September 2004

2nd Partial Cancellation 5 December 2005

3rd Partial Cancellation 5 October 2006

4th Partial Cancellation 8 June 2007

Final Cancellation 21 January 2008

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D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Membersa

Inception Mission 30 Jan–5 Feb 1999 1 7 a Review Mission1 25 Nov–16 Dec 1999 4 33 a, b, c Special Loan Administration 24 Ma –1 June 2000 1 8 e Review Mission 2 11–19 Nov 2000 2 13 e, f Special Loan Administration 23 Feb–2 Mar 2001 2 11 e, f Special Loan Administration 9–18 May 2001 9 14 e, f Special Loan Administration 26 Sep–5 Oct 2001 9 14 e, f Midterm Review 5–12 Sept 2002 1 7 f Review Mission 1 2–6 Oct 2002 1 4 f Review Mission 2 31 Oct–2 Nov 2002 2 2 c, f Review Mission 3 18 Nov–1 Dec 2002 1 13 f Review Mission 4 12 Sep–1 Oct 2003 2 26 f, g Review Mission 5 7–24 May 2004 2 25 f, g Review Mission 6 16–21 Dec 2004 1 5 f Review Mission 7 28 Jul–18 Aug 2005 3 35 f, h, i Review Mission 8 4–19 May 2006 2 22 f, i Review Mission 9 10–19 Nov 2006 1 10 F Review Mission 10 16 May–6 June 2007 2 16 f, I, d Project Completion Review 5–14 July 2008 2 10 f, i a a – rural development specialist (mission leader); b – manager, AWAR; c – country director, Nepal Resident Mission; d – gender and development specialist; e – project economist (mission leader); f – project implementation officer (mission leader); g – assistant project analyst; h – water resource specialist; and i – assistant disbursement analyst.

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I. PROJECT DESCRIPTION

1. Agriculture is the dominant sector of the Nepalese economy, accounting for one-third of gross domestic product and providing the main source of livelihood for about 80% of the rural population, the majority of whom are small farmers. Irrigation development has received high priority in public investment in the agriculture sector to increase cropping intensity and crop yields, and to shift to more profitable cropping patterns. The resultant increased incomes are expected to directly contribute to rural poverty reduction. However, the agriculture sector has traditionally performed below expectations mainly due to the lack of reliable irrigation, particularly in the Terai,1 which has the potential for significant agriculture development through the increased use of groundwater resources. Despite the potential for shallow tubewell (STW) irrigation in the Terai—given its favorable aquifer conditions and groundwater quality, and high annual recharge—its promotion has been constrained by the lack of a conducive policy environment and institutional mechanisms. Realizing the importance and potential of STW irrigation, the Government of Nepal’s 1996 Agriculture Perspective Plan (APP), Eighth Five-Year Plan (FY1993–FY1997) and Ninth Five-Year Plan (FY1998–FY2002) emphasized STW irrigation as a priority investment in the agriculture development strategy for the Terai. Rapid STW development requires (i) emphasis on group STWs; (ii) a conducive policy environment; (iii) access to credit, fertilizers, improved seeds, and extension services; (iv) connectivity from production centers to markets; (v) private sector participation; and (vi) technological choices. To address the above requirements, the Government removed capital cost subsidies for STWs, deregulated the STW trade, and asked the Asian Development Bank (ADB) for technical assistance (TA)2 to prepare the Community Groundwater Irrigation Sector Project on the basis of lessons from past groundwater irrigation projects, in general, and STW irrigation projects, in particular. 2. ADB approved a loan of SDR21.9 million ($30 million at appraisal) for the Project on 26 February 1998 and signed the Loan Agreement on 19 November 1998. The loan became effective on 3 March 1999. The Canadian International Development Agency (CIDA) co-financed the Project with a TA grant of $3.43 million.3 The project area covered all 12 districts in the Terai from the central and eastern development regions.4 The objectives of the Project were to (i) increase agricultural productivity on a sustainable basis; and (ii) improve incomes of small farmers holding less than a hectare (ha) of land through participatory, demand-driven, and integrated group STW development.5 The Project had four components:

(i) Community STW Development: This included (i) installation of 13,500 group STWs and 1,500 individual STWs from 300 village development committees or subproject areas; and (ii) irrigation of about 58,200 ha of land. The Project aimed to (i) establish water user groups (WUGs) and water user associations (WUAs); (ii) strengthen the capacity of the executing agencies, non-government organizations (NGOs), and participating financing institutions (PFIs); and (iii) assist the project management unit (PMU) in project management and supervision.

1 Nepal is divided into three distinct ecological regions: mountains, hills, and lowland plains. The lowland plains area

is called the Terai. 2 ADB. 1996. Technical Assistance to the Government of Nepal for the Community Groundwater Irrigation Sector

Project. Manila. 3 CIDA administered the TA. 4 These 12 districts are: Jhapa, Morang, Sunsari, Saptari, Siraha, Dhanusha, Mahottari, Sarlahi, Rautahat, Bara,

Parsa, and Chitwan. 5 ADB. 1998. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the

Government of Nepal for the Community Groundwater Irrigation Sector Project. Manila.

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(ii) Improvement of Farm-to-Market Roads: This component included (i) identification,

prioritization, and selection of farm-to-market roads for improvement; (ii) reaching agreements with the Department of Irrigation (DOI) on design and cost estimates; and (iii) improvement of 600 kilometers (km) of access roads and about 240 km of village roads.

(iii) Provision of Credit: This component included the delivery of credit for 13,500 group

STWs, 1,500 individual STWs, and needed farm inputs.

(iv) Implementation Assistance and Institutional Strengthening: This component included provision for (i) project management, administration, and a benefits monitoring system; (ii) establishment of an STW follow-up support system; (iii) procurement of vehicles and equipment; (iv) training of key personnel of the executing and implementing agencies; and (v) incremental operating costs.

3. DOI, which resides within the Ministry of Water Resources (MOWR), was responsible for implementation of components (i), (ii), and (iv). The Nepal Rastra Bank (NRB) was responsible for implementing component (iii). A senior DOI officer with a background in hydro-geology was assigned as the project director and stationed at the PMU located in the field. The chiefs of the four groundwater field offices (GFO), covering 2–3 districts each, were responsible for project implementation and monitoring in their respective areas. Local NGOs and PFIs provided social mobilization and microfinance services for STW and agriculture production. A project steering committee chaired by the secretary of MOWR provided overall policy and implementation guidance to the Project. The project management committee, which was led by the GFO chiefs, comprised local stakeholders and planned, implemented, and monitored field programs in each project district.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

4. The Project’s design was consistent with the Government’s strategy as detailed in the APP, Eighth Five-Year Plan, and Ninth Five-Year Plan. These plans accorded a priority to community STW irrigation development in the Terai to achieve high growth rates in the agriculture sector as the mainstay of the country’s economy. The Project’s objectives were also consistent with the principal strategy of ADB operations in the country.6 Despite the importance of and potential for STW development, its rapid implementation had been constrained by the Government’s budget limitation for capital cost subsidies. Small and marginal farmers and tenants had difficulties in installing STWs that required borrowing loans from institutional sources due to a lack of collateral. In accordance with the Government’s phased removal of capital cost subsidies, which began in 1997, the Project was designed for implementation with zero capital cost subsidies so that that installation of STW would not be constrained by a limited budget allocation from the Government. Farmer beneficiaries would be able to access institutional loans for STWs and agriculture production on a group-guarantee basis. As farming families that held less than 1 ha were the target beneficiaries, there was a provision for capacity building and training to enable them to sustainably manage STWs; extension services to optimize returns from agriculture; and

6 ADB prioritized a participatory approach to sustainable community irrigation development, increasing agricultural

income, and reducing rural poverty in Nepal.

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construction and improvement of farm-to-market roads to earn income by selling their farm produce. 5. The Project assumed that the Government’s removal of capital cost subsidies was widely accepted and that the decision had been taken in a consultative way. However, larger farmers, who had benefitted from the capital cost subsidies and had political and bureaucratic connections, resisted the policy decision for two years after the Project’s approval. There were attempts to announce a reintroduction of capital cost subsidies through annual budget speeches by the Government. These attempts were averted through intensive ADB and CIDA consultations with policy makers. This created confusion among the target beneficiaries and many potential farmers were reluctant to install STWs because they expected the reintroduction of capital cost subsidies. In addition, STWs could not be installed during the first two years of the Project because only a limited number of capable local NGOs and PFIs could be found for social mobilization, training, and loan delivery to farmer groups. The appraisal estimate of NRs75,000 per STW appeared to be almost double the actual average cost because of private sector involvement in STW trade and installation services. Competition among STW suppliers and drillers, and opportunities for farmer groups to choose the brand and specifications according to their requirement and management capacity, significantly reduced the average construction cost of STWs and resulted in low utilization of the loan funds allocated for credit delivery. These shortcomings confirmed that the Project was formulated with inadequate assessment of the policy and institutional environments for deregulated, private sector-led STW irrigation development. B. Project Outputs

6. The Project met about 85% of its output and outcome targets (Appendix 1) following the extension of its completion date by two years. Achievements under all four components were less than those envisaged at appraisal:

1. Community Shallow Tubewell Development

7. The Project installed 10,870 group STWs as compared to its target of 13,500 groups STWs and 1,500 individual STWs. Major emphasis was placed on promoting group STWs because they could cover at least 3.5 ha and serve five small and marginal farm families. An individual STW could cover only two ha and a single family. With 10,870 STWs, the Project provided year-round irrigation to 54,350 ha, which represented 93% of the targeted 58,200 ha (Appendix 2). This was made possible because average water delivery per STW was 15 liters per second compared with 10 liters per second that was the estimated during project design. Because of the higher rate of water discharge, WUGs rented out STWs to their non-member farmers, which increased annual utilization of STWs to about 400 hours and provided year-round irrigation to 5 ha on overage.7 Farmers were oriented on the Project’s approach and united into 13,000 WUGs and 222 WUAs. The capacity of WUGs and WUAs was enhanced through training and consultant services on installation and operation and maintenance (O&M) of STWs, irrigated agriculture practices, and financial management. The target for STW installation and irrigation development could not be met due to confusion over the policy reforms related to the withdrawal of capital cost subsidies and an uncertain security situation in many project districts between 2003 and 2005, which was the prime period of project implementation. 7 Development Vision Nepal. 2006. Shallow Tubewell Irrigation Impact Assessment Study. Kathmandu. This study

estimated that about 110 hours of STW operation is needed to provide full irrigation to 1 ha of land. By simulation, the current 10,870 STWs installed under the Project can provide full irrigation to 64,627 ha following the current practices of irrigating group members’ and non-member fellow farmers’ lands.

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Overly-centralized loan approval and delivery procedures, and a lack of qualified PFIs in the project districts also constrained the smooth installation of STWs during the initial four years of the Project. The number of STWs installed significantly increased after the confusion on capital cost subsidies was resolved, the security situation improved, and procedures for loan approval and delivery were simplified. 8. Some implementation modalities were adjusted during the mid-term review of the Project to expedite installation of STWs and expansion of irrigated areas. The major lessons indentified during the mid-term review included (i) decreasing the size of a STW group from 15 members to 5 members because of difficulties in mobilizing all the members of larger groups; (ii) decreasing the minimum size of land per STW from 4 ha to 3.5 ha to accommodate more small and marginal farmers; (iii) promoting the installation of STWs with 1–5 horsepower capacity, depending upon the requirement of each group and their capacity to finance, operate, and maintain STWs; (iv) increasing options for STW drilling (machine-operated or manual-based) depending upon aquifer conditions; and (v) use of drilling pipes (3” to 4”), depending upon the amount of water discharge required to irrigate the land of group members.

2. Improvement of Farm-to-Market Roads

9. A total of 300 km of farm-to-market roads, comprising access and village roads, were improved against the target of 840 km (Appendix 3). The main reason for the shortfall is that a subproject area was eligible for improvement of up to 2.8 km of road to connect a community to a market center only after it had installed 50 STWs for the production of cash crops or cereals. Due to the initial delays in project implementation, only 80 of 300 subprojects were able to install 50 STWs by the end of the Project and were eligible for support to improve roads. In addition, the demand for rural roads was much lower than anticipated during project design in 1997 because many donor-supported projects had improved rural roads in the interim. District development committees and village development committees utilized nearly 60% of their annual grant received from the Ministry of Local Development on construction and improvement of rural roads. Consequently, this component utilized only $2.7 million, or 31%, of the original allocation of $8.8 million. In response to demand from local communities, a causeway and five vented culverts were constructed in different subproject areas where rural roads had already been improved from other sources, which provided year-round connectivity of the subproject areas to markets. Thirty-five river crossings were also constructed in 32 subproject sites and humepipes were provided to WUAs to drain logged water from agricultural lands during the rainy season.

3. Provision of Credit

10. The Project provided loans through qualified PFIs to farmer groups on a group-guarantee basis for STW installation. Ten NRB-accredited commercial banks, development banks, and cooperatives operating in the project districts delivered 7,020 STW loans worth $3.17 million (Appendix 4). The remaining 3,850 STWs were either financed by WUGs themselves or borrowed from the banks, cooperatives, and other financial intermediaries not accredited by NRB. These institutions provided loans to farmer groups towards the later part of the Project after investment in STWs appeared to be highly profitable in light of the encouraging repayment performance of the borrowers. However, NRB was not able to involve a number of interested potential PFIs due to its limited resource base. The average rate of loan repayment was 92% to the accredited PFIs and 100% to non-accredited PFIs as a result of successful participatory monitoring. Thirty partner NGOs with experience working in the project area played an important role in mobilizing communities, and providing them with credit management and

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income-generation training and follow-up services (Appendix 5). However, only $3.17 million, or 23%, of the $13.6 million allocated for the credit component was utilized under the Project because the (i) loans delivered through non-accredited sources were not eligible for reimbursement; (ii) the average cost per STW decreased by as much as 60% due to deregulated STW trade and associated services; (iii) the development of new financial markets due to businesses created through the Project’s promotion of competition; and (iv) loans for agriculture production could not be delivered due to a lack of demand.

4. Implementation Assistance and Institutional Strengthening

11. This component included training and implementation assistance to the staff of the GFOs, partner NGOs, PFIs, and WUAs, and the Department of Agriculture (DOA) and NRB. A total of 848 training courses were organized with the participation of 28,590 persons, including 6,003 women. Key training areas included project orientation and implementation modalities, agriculture extension, credit and financial management, institutional development, environmental management, monitoring and evaluation, road improvement and quality control, and STW installation and O&M (Appendix 6). Six agriculture produce collection centers were constructed and wheel barrows and materials for the construction of plastic tunnels and crop collection yards were provided under subprojects producing commercial crops for market. However, only $0.94 million, or 35%, of the total $2.7 million allocated for trainings and workshops was utilized due to the restrictions of the Government’s foreign aid policy, formulated in 2002, with regard to using loan funds to finance overseas trainings, workshops, and observation visits for executing and implementing agency staff. 12. About 60% of WUG members were women, although their representation on the WUG executive committees was only about 20%. One member each from 156 WUAs participated in a 60-day training course on STW O&M. These individuals subsequently provided services to their respective WUA members on charging fees for services. Similarly, one member each from 130 WUAs participated in a 51-day basic agriculture extension training courses and subsequently provided fee-based extension services to their fellow farmers. These technicians had experience sustainably managing STWs and facilitating the production of high-value crops in their respective subprojects. 13. To assist project implementation, 14 jeeps, 1 car, 1 minibus, 46 motorcycles, and office equipment were procured. The actual cost of the vehicles and equipment was $0.47 million, which is 41% of the original allocation of $1.18 million. The main reasons for the low utilization rate were: (i) only 16 jeeps and 46 motorcycles were procured against the original target of 24 jeeps and 170 motorcycles since the target was found to be too high, and (ii) the per unit cost of the jeeps and motorcycles was about 20% less than the original estimate because the type of vehicles anticipated at the project design was not available at the time of procurement. During its field visit, the Project Completion Report Mission found that the vehicles and equipment were in good condition and being used in the project districts. A list of the vehicles, machines, and equipment procured is provided in Appendix 7. C. Project Costs

14. At appraisal, the total project cost was estimated at $42.81 million, of which $15.40 million was foreign exchange cost and $27.40 million equivalent was local currency cost.8 ADB

8 This includes the TA cost of $2.8 million originally provided by CIDA. CIDA later increased the TA grant to $3.43

million.

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was to provide a loan of $30 million, with the equivalent remainder provided by the Government ($5.35 million) and CIDA ($2.8 million), and the PFIs ($1.7 million) and beneficiaries ($2.9 million). At completion, the project cost amounted to $17.94 million equivalent, of which $6.16 million was foreign exchange cost, including $0.24 million for ADB loan’s service charge during implementation. Expenditure by component was $3.1 million for community STW development, $4.33 million for improvement of farm-to-market roads, $4.13 million for provision of credit, and $6.14 for implementation assistance and institutional strengthening. ADB and CIDA financed $4.45 million and $1.7 million in foreign exchange costs and $5.71 million and $1.73 million equivalent in local currency costs. About 57% of the total project cost was financed by ADB, which was 13% less than the appraisal target of 70%. The contribution of CIDA rose to 19% from the appraisal estimate of 7% as a result of increased social mobilization and onsite coaching to beneficiary groups and other local stakeholders, which was needed to implement the Project in a new policy environment and over the extended project period. The contribution of the Government rose to 18% from the appraisal estimate of 12%, while the contributions of the PFIs and beneficiaries decreased to 2% and 4% from the appraisal estimate of 4% and 7%, respectively. This was a reflection of the lower-than-expected rate of rural road construction, and credit services provided by the accredited PFIs in which farmer groups and PFIs had to bear 10%–20% of the total cost. Original and actual project costs by category, source, and component at project completion are in Appendix 8. D. Disbursements

15. The loan amount at appraisal was SDR21.9 million, of which SDR6.98 million was disbursed. As provided in the Loan Agreement, an imprest account was established with $0.5 million to ensure timely disbursement and efficient project implementation. However, a separate imprest account was established to ease access to the project fund for credit delivery by NRB and PFIs. Both of the imprest accounts were fully liquidated by 7 November 2007. The Project’s expenditure remained low until 2002 due to the slow pace of project implementation, which significantly accelerated thereafter until the end of the Project. The statement of expenditure procedure was also used for the loan. For small individual expenditures, the imprest account and statement of expenditure procedure were very useful and provided significant support for project implementation. The loan account was closed on 21 January 2008. Cumulative, annual, and quarterly loan disbursements are in Appendix 9. E. Project Schedule

16. The Project was originally envisaged to be implemented in four phases, over about 7 years, from July 1998 to December 2004. The appraisal loan account closing date was 31 July 2005. Due to delays in eliminating capital cost subsidies on STWs, the Loan Agreement was not signed until November 1998 and the loan became effective in March 1999. Actual project implementation in the field started from July 2000 after the Government had eliminated capital cost subsidies on STWs. However, the Project could install only a limited number of STWs during its initial two years due to confusion on the capital cost subsidies, lack of qualified PFIs in the project districts, and overly-centralized credit approval procedures. Project implementation picked up pace beginning in 2001 after the confusion on policy reforms was resolved, qualified PFIs were developed, and the credit approval mechanism was simplified. At the same time, the Government launched a drought relief program in five of the first- and second-phase project districts to provide 30% capital cost subsidies for STWs, which diverted the already mobilized farmer groups to the subsidized STWs. The Government quickly terminated the program after intensive consultations with ADB and CIDA. A poverty alleviation program supported by the United Nations Development Program distributed STWs free of cost to farmer groups in two of

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the Phase III project districts in 2002, which distorted the environment for implementing a zero capital cost subsidies program for STWs. Due to the initial project implementation delays and high security problems in some project districts, the Government requested, and ADB and CIDA agreed, to extend the loan and TA completion date by 1 year until 31 December 2005, and subsequently by an additional year until 31 December 2006 with loan and grant closing on 31 July 2007. The original and actual project implementation schedules are in Appendix 10. F. Implementation Arrangements

17. The implementation arrangements envisaged at project design were simple, and there were no major changes during implementation. DOI and NRB were the two executing agencies for the Project. DOI was responsible for planning and coordinating the Project’s non-credit components and reviewing and reporting their implementation progress. NRB was responsible for executing the credit component. A full-time project director was based in the project management unit at Janakpur, which was located centrally in the project area, and was responsible for project coordination, reporting, and overall monitoring and evaluation. The GFOs located in Biratnagar, Lahan, Mahottari, and Birgunj planned and implemented project activities jointly with DOA and NGOs, PFIs, WUAs, WUGs, and districts water user associations. The Groundwater Resource Development Board—chaired by the secretary of MOWR and represented by the Ministry of Local Development, National Planning Commission, DOA, NRB, PFIs, and partner NGO—acted as the steering committee for the Project. A project advisory committee—comprising DOI, DOA, ADB, and CIDA—was constituted and met every two months to address policy and operational issues through consultations with senior government officials. Government agencies at the district level were coordinated through the district appraisal committee—comprising representatives from DOI, DOA, PFIs, and NGOs—and reviewed, appraised, and recommended subprojects for implementation. 18. The PMU played an effective role in facilitating project implementation and coordinating with MOWR, DOI, DOA, and NRB. The TA consultants assisted the PMU in overall project implementation and the GFOs and other district level stakeholders in monitoring field programs. NRB trained potential PFIs and accredited them at the central level, approved loans from farmer groups, advanced funds to PFIs that lacked liquidity, and periodically monitored credit operations in the field. The DOA district offices prepared agricultural extension programs in coordination with the PMU. A portion of the program was implemented by DOA and the rest was outsourced to qualified private providers. The quality of DOA-implemented programs remained below expectations when compared with the private sector. The district water user associations and WUAs facilitated implementation and monitoring of field programs by promoting contacts among farmer groups, PFIs, STW drillers, and suppliers. Although the project design required mobile support and monitoring teams in each GFO, the teams were not formed because DOA and NRB could not second relevant subject matter specialists to the PMU. The Project’s central- and GFO-level monitoring and evaluation units performed the role of mobile support and monitoring teams. G. Conditions and Covenants

19. The loan was declared effective following fulfillment of the loan conditions, including NRB’s execution of a financing agreement with at least one PFI. The agreement became fully effective and legally binding when the Government signed an agreement with CIDA for a $2.8 million TA grant. Audited project accounts and the auditor’s report were prepared in accordance with sound auditing standards and submitted to ADB on time.

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20. The Project included 40 major loan covenants to be complied with during the project period. These covenants were adequate to ensure quality and accountability during project implementation. The covenants were monitored during the monthly and bimonthly project implementation meetings and during each loan review missions. All the covenants were complied with before completion of the Project on 31 December 2006. However, ADB and CIDA held intensive dialogues with senior government officials from 2001 to 2004 in order to sustain and institutionalize the policy reforms that eliminated capital cost subsidies for STWs, which otherwise would have suspended the right of the Borrower to make withdrawals from the loan account. Details on compliance with the loan covenants are provided in Appendix 11. H. Related Technical Assistance

21. The CIDA-financed TA grant of $3.43 million equivalent, which commenced in March 1999, was an integral part of the Project. The TA objectives were to (i) build capacity of the WUGs and WUAs; (ii) strengthen DOI, NRB, and DOA, and the PFIs and private sector in providing services; (iii) establish and operate a participatory benefits monitoring and evaluation system; (iv) promote participatory project management, coordination, and monitoring skills; (v) strengthen the environmental section of DOI; and (vi) strengthen overall institutional arrangements for STWs. CIDA recruited the Canadian Center for International Studies and Cooperation and Coady International, both Canada-based NGOs, which worked with a domestic consulting firm—GEOCE, Nepal—to provide consulting services. The TA provided international and national consultant services in the field of social mobilization, capacity building, credit and financial management, agriculture extension and marketing, gender and development, and overall STW O&M. A total of 336 person-months of consulting services consisting of about 280 person-months of domestic consultants and 56 person-months of international consultants were estimated at project design. However, the TA provided 577 person-months of domestic consultancy, with nearly 90% of it in participatory project management, agricultural economics, agriculture extension, and WUA management; and 77 person-months of international consultancy in financial management, cooperative development, gender and development, and rural credit. The TA also provided 3,188 person-months of social mobilization and facilitation services; and prepared handbooks for STW O&M and manuals for high-value crop production, WUG and WUA organizational management, and gender mainstreaming in community groundwater programs. After three years of TA implementation, team leadership was transferred to a national consultant from an international team leader. The TA inputs remained useful throughout project implementation and the TA was managed satisfactorily. Details on TA consulting services are in Appendix 12. I. Consultant Recruitment and Procurement

22. DOI recruited local consulting firms and individual consultants to undertake short-term assignments required for project implementation. The consultants were recruited to (i) carry out a survey and investigation of farm-to-market roads; (ii) prepare detailed design and tender documents; (iii) control the quality of civil works; (iv) train WUG and WUA members on innovative income generation schemes and skills; and (v) prepare the Borrower’s project completion report. DOI engaged local contractors to undertake civil works for the rehabilitation of office buildings; improvement of farm-to-market roads; and construction of causeways, culverts, river crossings, and agriculture produce collection centers. A list of major contracts in improvement of major farm-to-market roads is in Appendix 13. DOI procured jeeps, motorcycles, and office equipment and machineries to facilitate smooth implementation of the Project.

9

23. Local consulting firms and individual consultants were recruited following local competitive bidding and individual consultant recruitment procedures that were acceptable to ADB. Local contractors were engaged through local competitive bidding procedures acceptable to ADB. Jeeps were procured following international shopping procedures according to Guidelines for Procurement under Asian Development Loans. Office and training equipment, and machineries and motorcycles were procured through local competitive bidding procedure as provisioned in the Loan Agreement. The vehicles and equipment remained in good condition and generally used for their intended purposes, and that they had enhanced DOI’s institutional capacity. The rehabilitated and newly-constructed structures and improved farm-to-market roads were in good condition and fully utilized. J. Performance of Consultants, Contractors, and Suppliers

24. The performance of the inputs of the CIDA-financed grant TA was rated as satisfactory, given that most of the domestic and international consultants met the expected quality standards, and delivered inputs as per the requirements of the Project. The performance of DOI-recruited consulting firms and individual consultants was also rated as satisfactory. The quality of rehabilitated and newly-constructed structures, and improved farm-to-market roads met the required standards, and their construction was generally completed on time. As a result, the local contractors’ performance was also rated as satisfactory. However, there was inadequate competition among qualified contractors in some farm-to-market roads contracts due to the presences of cartels among contractors from respective districts. In some instances, contractors from other districts were threatened from submitting bids. However, this situation improved after ADB became further engaged in the contract award process and disqualified awards in cases where evidence of malpractice existed. The performance of suppliers was also rated as satisfactory, given that the vehicles, equipment, and machineries were supplied on time and remained operational throughout the project period with limited repairs and replacement. 25. The WUGs procured STWs and driller services from firms and individuals that were pre-qualified by the Project. The procedures for obtaining services and payments were clarified during orientation programs held for WUGs, suppliers, and drillers. Since the WUGs had options when choosing suppliers and drillers, and ample room for negotiations to obtain warranty or complementary services for a year after installation, the STW failure rate was less than 1%. The performance of STW suppliers and drillers were also rated as satisfactory. K. Performance of the Borrower and the Executing Agency

26. The performances of the Borrower, DOI, and NRB were all rated as satisfactory. Although the issues of capital cost subsidies for STWs remained active even after the policy decision by the Government, which significantly slowed the Project during its start-up phase, the decision was not reversed despite pressures from interest groups. Project decisions were made generally on time, adequate counterpart funds were provided, and the continuity of key project staff was maintained in the PMU and GFOs. However, in some years, delays were experienced in the annual program approval by the National Planning Commission and release of budget expenditure authorization to the PMU by DOI. Although project monitoring by DOI remained infrequent, PMU staff actively monitored field programs despite the difficult security situation in many project districts. DOI assigned a competent project director after the Project’s mid-term review in 2000. The new leadership expedited project implementation and the Government and ADB commended the work with a best performing project management team award for 2004. However, the PMU and GFOs were alleged to have demonstrated insufficient commitment to systematically involve users in project implementation and monitoring, particularly with respect

10

to keeping expenditures for farm-to-market roads transparent, which resulted in friction between the project staff and WUAs. The PMU immediately responded to the allegation by disclosing budget details and a schedule of road improvement works for each eligible subproject. DOA provided agriculture extension services and links with marketing service providers and the private sector, although its performance remained below expectations. NRB promptly acted to simplify credit approval and delivery mechanisms, although it was often not fully committed to meeting its own annual targets for STW loans and could deliver only a limited number of agriculture production loans to farmer groups. L. Performance of the Asian Development Bank

27. ADB’s performance was rated as satisfactory. Given that the Project was implemented in an environment of zero capital cost subsidies, it required frequent consultation and follow up with central government officials and local stakeholders to clarify project approaches. For this purpose, the Project was delegated to ADB’s Nepal Resident Mission in 2002 and the Mission has since provided supervision and conducted subproject site visits. ADB fielded 15 missions, including 1 inception mission, 4 special administration missions, 9 review missions, 1 mid-term review mission, and 1 PCR mission. All 14 of the missions fielded during project implementation discussed key issues with the Government and local stakeholders, including a time-bound action plan that could be readily monitored. ADB was flexible and agreed to adjustments to overcome problems arising from changing circumstances. ADB agreed to two extensions, which extended the loan closing date by a total of 2 years, to allow the Project to be completed by accounting for project implementation delays due to a lack of clarity on policy reforms, a volatile security situation, and other factors beyond the executing agencies’ control. 28. The Mid-Term Review Mission made several adjustments to expedite project implementation. In particular, the implementation modality for farm-to-market roads was clarified and made flexible, and qualified WUAs were allowed to be contracted for earth and simple gravel works, for which a post-qualification procurement method was promoted. Guidelines to procure services from private providers were agreed to and implemented. A separate imprest account was established for NRB and a provision to flow operational costs directly to NRB was introduced, which required two revisions to the Loan Agreement. In addition to the bimonthly meetings, ADB instituted monthly meetings with the project management team to promote regular feedback on project progress and issues, and achieve improved project performance.

III. EVALUATION OF PERFORMANCE

A. Relevance

29. From the time of approval, the Project was highly relevant to the Government’s and ADB’s development strategies of increasing year-round irrigated areas to increase agricultural production and farmers’ income, and reduce rural poverty. The development strategies of the Government and ADB continue to promote the active and systematic participation of beneficiary farmers in irrigation development through a group approach to ensure ownership and proper O&M; and the sustainability of benefits, generation of employment opportunities, and reduction of rural poverty. 9 The Government’s Three-Year Interim Plan (FY2008–FY2010) has given priority to promote pro-poor micro-irrigation technologies, including STW, to increase agriculture production and achieve annual agricultural growth of 5.5% during the plan’s implementation period. Promotion of pro-poor irrigation technology such as STWs, with emphasis on group

9 Approximately 31% of the population is estimated to be living below the poverty line in Nepal.

11

STWs and improved access to requisite inputs and markets for increased income and employment opportunities, continues to be the Government’s key strategy to addressing rural poverty in the Terai. Institutional and management arrangements were generally well-designed at the executing agency and beneficiary levels. The capacity of service providers was developed and beneficiary linkages with the service providers were established to maximize the benefits from irrigated agriculture. Project outputs were generally relevant to achieving outcomes and impacts, both at the time of project appraisal and completion. B. Effectiveness in Achieving Outcome

30. The Project was effective in achieving its outcomes, although this was only possible following the extension of the closing date by two years. The Project’s indirect benefits included formation and capacity development of community institutions; and social and economic empowerment of small and marginal farmers and women through their participation in field programs, including serving on the executive committees of the WUGs and WUAs. At appraisal, it was estimated that the Project’s key quantifiable benefits would be an increase in year-round irrigated areas and agriculture production during the project period. The year-round irrigated area increased by 54,350 ha, which was 93% of the appraisal target of 58,200 ha. The achievement was slightly lower than envisaged due to confusion over policy reforms related to capital cost subsidies for STWs and credit delivery constraints during the Project’s initial two years, which continued to a lesser extent throughout the project period, and the poor security situation in some project districts between 2003 and 2005. Cropping intensity increased by 79%, which was higher than the appraisal target of 50%. Average crop yield increased by 62%, which was higher than the appraisal expectations of an increase between 25% and 50%. Annual total farm output increased by 278,892 t, which was 26% higher that the appraisal target of 221,300 t. The main reasons for exceeding crop yield targets included the large amount of time dedicated to irrigating the lands of group members and non-member fellow farmers by renting out STWs, and the achievement of water discharge capacity of STWs that was 50% higher than the appraisal estimate. The beneficiary households’ average annual net income increased by NRs18,315, which was significantly more than the appraisal target of NRs6,550.

31. The Project’s incremental outputs included 91,348 t of paddy, 49,250 t of wheat, 14,462 t of maize, 61,920 t of sugarcane, 28,842 t of vegetables, 29,248 t of potato, and 5,424 t of spring maize. Except for sugarcane (as a result of farmers’ preference to grow more profitable crops), the incremental outputs for all other crops exceeded their appraisal targets. As a result of farmers’ preference to produce more profitable crops on irrigated land, the incremental output of sugarcane was about 82% of the appraisal target. The increase in crop productivity ranged from 24% for potato to 117% for wheat. Productivity increases for cereals and vegetables per ha were as follows: 3.51 t from 1.8 t for early paddy, 3.4 t from 2.52 t for main paddy, 2.6 t from 1.2 t for wheat, 2.35 t from 1.44 t for maize, 32 t from 20 t for sugarcane, 12 t from 9.7 t for potato, and 8.7 t from 6.6 t for vegetables. Details on crop yields, cropped area, and the production of cereal and cash crops, with and without project situations, are in Table A14.1. C. Efficiency in Achieving Outcome and Outputs

32. The Project was found to be efficient in achieving its outcomes and outputs on the basis of financial and economic analyses following the same methodology used at appraisal (Appendix 14). The financial internal rate of return (FIRR) for the Project as a whole was 26.6% for the base year, with a financial cost-benefit ratio of 1.21 at a 14% discount rate (Table A14.10). The FIRR was not estimated for the Project at appraisal. The sensitivity analysis showed the FIRR to be within the range of 8.6%–20.4% (Table A14.12). The main reasons for

12

the high FIRR were that the incremental production of paddy, wheat, vegetable, and potato—and increases in cropping intensity—were much higher than the appraisal targets. 33. The overall economic internal rater of return (EIRR), based on cost and benefit streams for the Project, was 51.1%, which was at the highest point of the 31%–55% EIRR range estimated at project appraisal. The economic cost-benefit ratio was 2.55 at a 14% discount rate (Table A14.11). The sensitivity analysis showed the EIRR to be within the range of 30.9%–47.7% (Table A14.12). The main reasons for the higher EIRR included: (i) the total year-round irrigated area almost met the appraisal target; (ii) the WUGs were properly operating and maintaining STWs; (iii) overall cropping intensity exceeded the appraisal projections; (iv) the net irrigated cropped area increased to 121,687 ha from 84,390 ha; and (v) annual total farm production was 278,892 t. The potential exists to increase the EIRR and household income if DOI were to provide water management skills training to the WUGs and irrigate more land by making optimum utilization of STWs. If the benefits accrued from institutional development in rural communities and empowerment of women and disadvantaged project beneficiaries were taken into account, the Project would easily exceed the appraisal EIRR range. D. Preliminary Assessment of Sustainability

34. The Government and WUAs are likely to sustain project outputs since almost all of the key sustainability indicators—capacity of the WUAs and their assumption of O&M responsibility of STWs, income generation from renting out STWs to non-member fellow farmers, and establishment of group funds for small maintenance of farm-to-market roads—were effective in all of the WUAs. Although all of the WUGs, WUAs, and district water user associations were operational, variations were observed in their functional status and water management skills during the spring and winter seasons. Both the NRB accredited and non-accredited PFIs were providing STW loans to recently-organized WUGs and their loan repayment rate was almost 100%, which indicates farmers’ access to loans for STWs was secured. 35. The farm-to-market roads that were improved under the Project were functional and annual maintenance was carried out by the WUAs. In some instances, the WUGs have collected tolls from the commercial users of the roads. Village development committees provided funds from their annual grant from the central government to repair roads if there were damages beyond the capacity of the WUAs to finance. Marketing committees under the WUAs managed and expanded the existing facilities in agriculture produce collection center by raising tolls from users. In addition, the Government has retained some key project staff and allocated NRs50 million ($0.7 million) annually for three years (FY2008–FY2010) to consolidate the community institutions developed, agriculture technologies introduced, and infrastructure built during the project implementation period. Although small in scale, the Government has been replicating the project approach in new areas. These factors contribute to the conclusion that project benefits and approaches are likely to be sustained by the Government and farmer groups. E. Impact

36. The financial impact of the Project on beneficiary households has been encouraging. A survey conducted by DOI in August 2007 in sample subprojects concluded that marginal and small farmers, mostly from disadvantaged communities and holding less than 1 ha of land, had increased their annual net income by NRs30,000 ($411) per ha on average. The increase in incomes among marginal and small farmers’ has had positive impacts on their food security and

13

family healthcare, and has directly contributed to poverty reduction.10 The project-wide estimate was that beneficiary households had increased their annual net income by NRs18,315 ($251) per ha as a result of participation in the Project. This increase was much higher than the appraisal target of an average increase in annual net income of NRs6,550 ($90) for all beneficiary households. 37. Water from about 40% of the installed STWs was assessed by DOI’s environmental management division with the support from an international environment specialist under the CIDA-financed grant TA. It was found that water from the sample STWs contained arsenic at levels far below the level of 100 particles per billion, which is the universally-accepted standard, and that the water was safe for irrigation purpose. The use of chemical fertilizers and pesticides in the project area was lower than the recommended ceilings and is unlikely to have damaged aquatic ecosystems and wildlife. There were no complaints from farmers regarding reduced downstream groundwater flow. There were no adverse environmental impacts of the Project. 38. The Project’s social impacts were encouraging. Following the group approach, the Project provided access to year-round irrigation to marginal and small farmers, among them women, who were not benefiting from pre-existing sources of irrigation due to their small land holdings. Out of the total of 39,334 farmers directly associated with the Project’s WUGs, about 60% were female and 33% came from disadvantaged groups. The executive committees of the WUGs and WUAs were 20% female and 16% representatives from disadvantaged groups. About 21% of the 28,590 training participants were women. These activities helped women to play active roles in planning, implementing, and managing STWs, farm-to-market roads, and agriculture programs, which improved their confidence in local resource management and strengthened their social status.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

39. The Project was rated as successful in its relevance, effectiveness, efficiency, sustainability, and other impact criteria. The Project was designed in line with the strategic priorities of the Government and ADB. Had there been adequate consultations with central and local stakeholders on the policy reforms before approval of the Project and a careful institutional assessment of the project area during its design, the Project’s performance might have been even better. However, the adverse impacts of the above shortcomings were mitigated by implementing the Project in close consultation with central and local stakeholders. The Project was able to provide year-round irrigation on 93% of the targeted 58,200 ha of land and was able to do so at 40% of the estimated cost. Its impact was visible in terms of increasing production, improving the productivity and income of target groups, and socially empowering poor households and women. The capacity of DOI to implement community-based STW programs has improved and there is evidence that the Government is replicating this approach in new areas of the Terai, although the scale of implementation remains small. B. Lessons

40. The Project was the first of its kind in Nepal implemented with zero capital cost subsidies for STWs. The Project demonstrated its financial and social viability for marginal and small farmers by organizing them into groups. Social mobilization, community infrastructure

10 DOI. 2007. Status Report of the Community Groundwater Irrigation Sector Project. Kathmandu.

14

development, provision of loans on a group-guarantee basis, and agriculture extension services achieved the intended results even in the absence of direct capital cost subsidies. 41. Clarity and commitment on policy reforms are critical to the smooth implementation of a project that has direct links to policy reforms. Implementation remained slowed during the first two years of the Project due to the Government’s lack of clarity and commitment with respect to relevant policy reforms. This resulted in the implementation of parallel programs that did not follow the policy reforms. 42. Proactive orientation programs on project approaches, implementation modalities, and the role of stakeholders can contribute to successful project implementation. Key implementation partners--NGOs, PFIs, beneficiary groups, and government line agencies—remained confused over the issues of the Project’s approach and modalities during the initial project period, which delayed effective implementation. 43. The promotion of technological options contributes to cost-effective irrigation development suitable for small and marginal farmers. The Project encouraged farmers to use locally-available, cost-effective STW construction materials that were overlooked at the time of project design and resulted in much higher cost estimates than the actual cost per STW. 44. When properly guided and trained, farmers can manage procurement, installation, and management of STWs on their own. After being given an orientation on and exposure to service providers and suppliers by the Project, farmer groups were able to contact drillers and STW suppliers, install STWs under their own direct supervision, and continue relationships for follow-up services. 45. Training and capacity building for project partners were both essential for the efficient delivery of quality services. Many partner NGOs and PFIs were not well motivated because the Project did not provide basic transport, equipment, training, and exposure. The local partner organizations were also generally weak on business skills, resource endowment, and logistics for service delivery, which were some of the key areas that needed to be covered under their contracts. 46. Agriculture extension services from the private sector can enhance the outcomes of irrigation projects. Services provided through government agencies remained limited and less effective due to staff and resource constraints. Services should be delivered in a coordinated way so that more areas and farmer groups are served and overall production is increased. 47. Community organizations such as the WUAs and district water user associations can act as reliable facilitators between the Project and beneficiary groups for effective project implementation and sustainability. Their roles can be broadened for social mobilization, STW O&M, and village level agriculture extension services by providing them with refresher trainings. C. Recommendations

1. Project Related 48. The strong commitment of DOA and sufficient capacity within the private sector are critical in achieving the desired project outcome of increasing agriculture productivity and farmers’ income. Agriculture program budgets should be provided directly to DOA, which in turn

15

should outsource service delivery to the private sector and monitor activities in coordination with the Project. 49. Target beneficiaries and implementing agencies should be consulted during project formulation so that its approaches and implementation modalities are well known from the beginning. The expected outputs of each stakeholder should be clearly identified and linked to the outputs of other stakeholders, which will facilitate participatory monitoring and meeting project targets. 50. An insufficient number of viable PFIs constrained the efficient delivery of credit services under the Project. In addition, available PFIs were constrained in their reach due to limited staff, a lack of incentives, and a difficult security situation in the project areas. The PFIs should be allowed to participate in the Project on a merit basis with provisions for monitoring their activities. Credit approval and delivery mechanisms should be short and efficient by devolving greater authority to local offices. 51. Farm-to-market roads need to be improved in coordination with both district and village development committees. Construction of culverts, small bridges, and causeways were found to be useful in developing connectivity to rural markets since improved rural roads already exist in the Terai. Given the increased volume of cash crops being produced in the project area, the construction of additional collection centers could help farmers to increase access to markets and sell more of their produce. 52. The PMU needs to improve coordination among development organizations in the project area, enhance field monitoring, and regularly solicit feedback from stakeholders to improve project implementation. The PMU should ensure effective communication with GFOs to keep them informed of any changes while filed level issues are raised at the central level. Changes in agriculture production should be monitored jointly by DOA and the GFOs and beneficiary organizations. 53. As the Project was extended by two years, its implementation ended in July 2007. The project benefits are expected to be realized until three years following completion. It is suggested that the project performance evaluation report be prepared in 2010.

2. General

54. The Government should have taken the policy decision for the removal of capital cost subsidies in a consultative way to ensure that the decision was owned by most stakeholders. ADB should have approved the Project only after a careful assessment of the policy and institutional environments. In addition, the Project should have been designed for the entire Terai to benefit all potential farmers and minimize resistance to the policy reforms. Nevertheless, the Project has proved the viability of STW irrigation development without capital cost subsidies through the provision of loans on a group guarantee basis for small and marginal farmers. This approach and modality for STW irrigation development should be continued.

55. Future STW development projects should either have a provision for connecting potential STW clusters with the central electricity grid or be implemented in conjunction with the Government’s rural electrification program as both DOI and the Nepal Electricity Authority are under the same ministry. This will generate more benefits for farmers by facilitating rapid expansion of STWs with lower required capital investment and operating costs.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary

Performance Indicators/Targets

Assessment after Completion

Remarks

1. Impact Sustained economic growth of the Terai and poverty reduction

Annual per capita income of small and marginal farm families raised by at least 24%–35% by 2009

A 35% increase in income per household on an average by July 2007

2. Outcome 2.1 To increase agricultural

productivity on a sustainable basis

2.2 To improve incomes of

small farmers

Irrigated area increased by 58,200 hectares (ha) by 2005 Average cropping intensity increased by about 50% by 2005 Average crop yields increased by 25%–50% by 2009 Incremental output of about 88,600 metric tons (t) of paddy, 42,400 t of wheat, 75,700 t of sugarcane, and 14,600 t of potatoes and vegetables produced by 2009 Beneficiaries’ total household incomes per annum increased by 24%–35%t by 2009 (up to NRs7,600 for owner operators and NRs5,500 for tenants per annum) Economic Internal rates of return (EIRR) of subprojects range from 31% to 55%

Irrigated area increased by 54,350 ha by 2007 Average cropping intensity increased from between145% and 224% Average crop yields increased by 24%–117% by 2007 Incremental outputs of 91,348 t of paddy, 49,250 t of wheat, 19,886 t of maize, 61,920 t of sugarcane, 28,842 t of potato, and 29,248 t of vegetables produced Beneficiaries’ total household incomes per annum increased by 35% by 2007. Project beneficiaries have generated an incremental revenue of NRs18,315 per ha from crop production

EIRR for project as a whole is calculated at 51%, which is within the range estimated at project appraisal

Initial delays in implementation of almost two years due to uncertainty over subsidy policy reforms affected the total irrigated area development as per the target The project provided 2,830 person-years of employment during implementation and 3,170 person-years of on-farm employment in 2007

3. Components and Outputs Part A: Community STW Development 3.1 WUGs and WUAs formed

and strengthened to participate actively in planning, designing, implementing, and operating their shallow tubewells (STWs)

3.2 Improved irrigated

production methods promoted for adoption among beneficiaries

13,500 WUGs and 300 WUAs formed by 2004 About 336 persons-months of consulting services fielded by September 1997 About 300 person-months of community mobilization specialists, 900 person-months of social facilitators, and 300 person-months of financial services facilitators fielded by September 1999

A total of 13,000 WUGs and 222 WUAs formed by 2007 Total of 654 persons-months of consulting services (577 domestic and 77 international) provided by August 2007 A total of 3,188 person-months of community mobilization, social facilitation, and financial facilitation fielded by July 2006 A total of 884 trainings were conducted in various fields and

Appendix 1 17

Part B: Improvement of Farm-to-Market Roads 3.3 Constraints in farm-to-

market transportation are resolved to enable beneficiaries to market their surplus output

Part C: Provision of Credit 3.4 Credit of STW investments

and crop production provided by the private financial institutions (PFIs) to groups of beneficiaries without collateral

Part D: Implementation Assistance and Institutional Strengthening 3.5 DOI, NRB, DOA, and the

PMU and PFIs strengthened to provide effective project management and create a sustainable STW support system

About 600 kilometers (km) of access roads and 240 km of village roads improved by 2004

Credit for construction of 15,000 STWs, comprising 13,500 group STWs and 1,500 individual STWs, grouped into 300 subprojects financed by PFIs by 2004 Crop production credit provided to beneficiaries to promote adoption of improved agronomic practices

Staff of DOI, NRB, DOA and the PMU and PFIs trained in participatory management by 2000

Semiannual workshops held to review, coordinate, and plan project activities

Vehicles and equipment provided to PMU, DOI, NRB and DOA by 2000.

PMIS and BME system established in PMU by 1999 An environmental unit established within DOI by 1999 STW development follow-up support mechanism developed by 2000. Workshops, demonstration plots, farmers’ field days, study

levels. In addition, 156 village–level, agriculture worker trainings were conducted for WUA members to enable them to works as junior technicians or junior technical assistants A total of 300.28 km of farm-to-market roads improved by July 2007

A total of 10,870 community STWs installed by July 2007; 7,020 credits delivered for STWs under the Project Crop production credit has been quite small compared with STW development because of low demand One overseas training and 299 local trainings were organized and provided to DOI, DOA, NRB, and the PMU and PFI staff by July 2007 Semiannual workshops held to review, coordinate, and plan project activities

Sixteen four-wheel vehicles, 46 motor cycles, 44 computers, 11 photocopy machines, 3 fax machines, and other equipment provided by July 2007

Established in 2000 Environmental unit established at DOI in 2000 Demonstration programs were organized at 55,539 plots in 12

The remaining 3,850 STWs were financed either by WUGs or financial intermediaries not accredited by NRB and not eligible for reimbursement under the Project

18 Appendix 1

BME = benefit monitoring system, DOA = Department of Agriculture, DOI = Department of Irrigation, EIRR = economic internal rate of return, NGO = non-governmental organization, NRB = Nepal Rastra Bank, NRs = Nepalese rupees, PFI = participating financing institutions, PMIS = project management information system, PMU = project management unit, STW = shallow tubewell, t = metric ton, WUA = water user association, WUG = water user group. Sources: ADB, 1998. Report and Recommendation of the President to the Board of Directors on a Proposed Loan to the

Kingdom of Nepal for the Community Groundwater Irrigation Sector Project. Manila DOI. 2008. Borrower’s Project Completion Report for the Community Groundwater Irrigation Sector Project. Kathmandu. Aide Memoire of Project Completion Review Mission, July 2008.

tours, and training courses held to promote crop intensification and diversification

districts for disseminating information to farmers about improved irrigated production methods and crop diversification

4. Activities 4.1 Community STW

Development • 13,500 WUGs and

300 WUAs established, registered, and strengthened

• Training of farmers in improved agronomic practices undertaken

• Subprojects identified and selected

• Feasibility of selected subprojects studied

4.2 Improvement of Farm-

to-Market Roads • Access roads and

village roads improved 4.3 Provision of Credit

• Credit of Selected subprojects approved by PFIs

• STWs constructed by private sector providers

4.4 Implementation

Assistance and Institutional Strengthening

• Vehicles & equipment

procured • Training materials

prepared & distributed • Project staff trained • Consultants fielded • Management

information system & benefit monitoring tion system established

Planned Inputs $2.8 million $12.6 million $17.0 million $9.4 million Service Charge $1.0 million Total Cost $42.8 million

Actual $3.1 million was invested by 31 July 2007 Actual expenditure was $4.3 million Actual expenditure was $4.13 million Actual expenditure $6.14 million Actual service charge $0.24 million Actual total cost $17.94 million

Low expenditure resulted from delays in eliminating capital cost subsidy for STW, inadequate number of PFIs, and insecurity in some project districts Total cost under run was because of delays in project implementation, slow credit delivery, and overall low investment required compared to appraisal estimate

Appendix 2 19

NUMBER OF SHALLOW TUBEWELLS INSTALLED AND AREA IRRIGATED

Table A2.1: Number of Shallow Tubewells Installed by District and Year

Year

District 2001 2002 2003 2004 2005 2006 2007 Total

Jhapa 56 195 164 216 228 316 644 1,819Morang 15 67 130 144 253 140 563 1,312Sunsari 0 0 18 135 281 154 236 824Saptari 0 0 4 46 82 74 14 220Siraha 0 0 2 41 55 53 84 235Dhanusha 0 0 3 32 126 243 390 794Mahottari 0 0 5 81 229 234 482 1,031Sarlahi 0 0 0 125 283 262 359 1,029Rautahat 0 80 129 165 178 102 149 803Bara 12 25 24 187 267 481 477 1,473Parsa 0 15 58 137 209 237 316 972Chitwan 0 0 0 21 66 115 156 358Total 83 382 537 1,330 2,257 2,411 3,870 10,870

Sources: Department of Irrigation. 2008. Borrower’s Project Completion Report for the Community Groundwater Irrigation Sector Project. Kathmandu; and Project Completion Review Mission, July 2008.

Table A2.2: Total Area Irrigated by District and Year

Irrigated Area by Year (ha) District 2001 2002 2003 2004 2005 2006 2007 Total Bara 60 125 120 935 1,335 2,405 2,385 7,365 Chitwan 105 330 575 780 1,790 Dhanusha 15 160 630 1,215 1,950 3,970 Jhapa 280 975 820 1,080 1,140 1,580 3,220 9,095 Mahottari 25 405 1,145 1,170 2,410 5,155 Morang 75 335 650 720 1,265 700 2,815 6,560 Parsa — 75 290 685 1,045 1,185 1,580 4,860 Rautahat 400 645 825 890 510 745 4,015 Saptari 20 230 410 370 70 1,100 Sarlahi — 625 1,415 1,310 1,795 5,145 Siraha 10 205 275 265 420 1,175 Sunsari 90 675 1,405 770 1,180 4,120 Total 415 1,910 2,685 6,650 11,285 12,055 19,350 54,350

— = no data available, ha = hectare. Sources: Department of Irrigation. 2008. Borrower’s Project Completion Report for the Community Groundwater Irrigation Sector Project. Kathmandu; and Project Completion Review Mission, July 2008.

20 Appendix 3

FARM-TO-MARKET ROADS IMPROVED

District No. of Subprojects Covered Road Length (km) Jhapa 26 86.20 Morang 23 56.60 Sunsari 15 47.55 Saptari 3 3.50 Siraha 3 2.94 Dhanusha 8 9.77 Mahottari 11 12.92 Sarlahi 6 9.08 Rautahat 6 19.91 Bara 16 35.11 Parsa 9 13.05 Chitwan 4 3.65 Total 130 300.28

km = kilometer; No. = number. Source: Project Completion Review Mission, July 2008.

Appendix 4 21

PARTICIPATING FINANCIAL INSTITUTIONS AND CREDIT DELIVERY

Table A4.1: List of Nepal Rastra Bank Accredited Participating Financing Institutions

No. Name of Institutions Accreditation Date 1 Nepal Bank Limited, Kathmandu 12-Feb-99 2 Sahara Savings and Credit Cooperative Society, Jhapa 30-Mar-01 3 Eastern Rural Development Bank, Biratnagar 30-Feb-02 4 DEPROSC Development Bank, Chitwan 30-Feb-02 5 Central Rural Development Bank, Janakpur 16-Jan-03 6 Arunodaya Savings and Credit Cooperatives, Parsa 11-Jun-03 7 Krisak Savings and Credit Cooperatives, Chitwan 12-Jun-03 8 Chhimek Development Bank, Hetauda 03-Dec-03 9 Chhimek Samaj Sewa Sastha, Kathmandu 29-Nov-06 10 Sana Kisan Bank Limited, Kathmandu 07-Sep-06

Sources: Department of Irrigation. 2008. Borrower’s Project Completion Report for the Community Groundwater Irrigation Sector Project. Manila; and Project Completion Review Mission, July 2008.

Table A4.2: Credit Delivery, Beneficiary Household, and Repayment Performance

Fiscal Year

Total No. of

Loans Disbursed

Total Beneficiary Households

(No.)

Total Loan Disbursed

($)

Loan Repayment

($)

Outstanding Amount

($)

2001 91 562 47,371 — 47,371

2002 300 1,865 73,943 — 73,943

2003 563 2,164 141,582 30,126 111,456

2004 908 4,927 276,925 — 276,925

2005 1,568 8,422 587,815 2,160 585,654

2006 1,935 7,412 722,158 5,120 717,038

2007 1,655 13,584 1,262,432 24,705 1,237,727

Total 7,020 39,334 3,112,226 62,111 3,050,115 — = not available, No. = number. Source: Nepal Rastra Bank.

22 Appendix 5

PARTNER NONGOVERNMENT ORGANIZATIONS

No. Name of Organization Location 1 Nepal Community Development Center Jhapa 2 Shara Nepal Jhapa 3 District Water User Association Jhapa 4 Rural Reconstruction Nepal Morang 5 District Water User Association Morang 6 Nari Bikas Sangh Sunsari 7 District Water User Association Sunsari 8 Gram Sewa Samuha Saptari 9 Mahuli Community Development Center Saptari

10 Community Women Development Center Saptari 11 Indreni Sewa Samaj Siraha 12 Shrijana Community Development Center Siraha 13 Bhawani Integrated Development Center Siraha 14 Janaki Women Awareness Society Dhanusha 15 Social Development Path Dhanusha 16 Society for Environment and National Development Dhanusha 17 Rural Community Development Service Council Mahottari 18 Ratauli Yuba Club Dhanusha 19 Integrated Rural Development Society Mahottari 20 Mahila Sanskritik Utthan Kendra Mahottari 21 Bagmati Sewa Samaj Sarlahi 22 Healthy Society and Environment Protection Center Sarlahi 23 Samaj Sewa Yuba Sangh Sarlahi 24 DEPROSC Nepal Rautahat 25 Chhimek Samaj Dhanusha 26 Child Welfare Society Bara 27 Nepal Redcross Society Bara 28 Arunodays Youth Club Parsa 29 Renaisance Society Nepal Parsa 30 MADE Nepal Chitwan

Source: Project Completion Review Mission, July 2008.

Appendix 6 23

KEY TRAINING PROVIDED AND PARTICIPANTS

Training Participants

Training Type

Total

Training (No.)

Male (No.)

Female (No.)

Total

Participants (No.)

Agriculture Extension

267 7,726 3,226 10,952

Orientation on Project Implementation

241 7,439 1,092 8,531

Financial and Credit Management

11 181 13 194

Institutional Development and Environmental Management

1,969 1,113 3,082

Monitoring and Evaluation

52 1,923 238 2,161

Road Improvement and Quality Control

37 84 589

STW Installation, Operation, and Maintenance

135 2,844 237 3,081

Total 848 22,587 6,003 28,590

STW = shallow tubewell, No. = number. Sources: Department of Irrigation. 2008. Borrower’s Project Completion Report for the Community Groundwater Irrigation Sector Project. Kathmandu; and Project Completion Review Mission, July 2008.

24 Appendix 7

VEHICLES AND EQUIPMENT PROCURED AND ASSIGNED

Table A7.1: Types of Vehicles Procured and Assigned

Vehicle Vehicle Brand Purchased Assigned Type Year No Place No.

Motorcycle i. Futong 2003 12 GFO, Biratnagar 1 GFO, Lahan 1 GFO, Mahottari 1 GFO, Birgunj 1 Office of Financial Comptroller, Janakpur 1 PMU, Janakpur 7 ii. YBX Yamaha 1999 10 GFO, Biratnagar 3 GFO, Birgunj 1 GRDP, Kathmandu 1 DOI, Lalitpur 1 PMU, Janakpur 4 iii. Starway 1999 24 GFO, Biratnagar 5 GFO, Lahan 2 GFO, Mahottari 3 GFO, Birgunj 4 GRDP, Kathmandu 3 NRB, Janakpur 1 PMU, Janakpur 6 Car Hyundai Jeep 2003 1 PMU, Janakpur 1 Pickup Isuzu (double cab) 1999 14 GFO, Biratnagar 1 GFO, Lahan 1 GFO, Mahottari 1 GFO, Birgunj 1 NRB, Kathmandu 3 GRDP, Kathmandu 2 PMU, Janakpur 5 Minibus Acer 1999 1 PMU, Janakpur 1 Total Motorcycle 46 Car 1 Pickup 14 Minibus 1

GFO = groundwater field office, GRDP = groundwater resources development project, NRB = Nepal Rastra Bank, PMU = project management unit. Source: Department of Irrigation. 2008. Borrower’s Project Completion Report for the Community Groundwater Irrigation Sector Project. Kathmandu.

Appendix 7 25

Table A7.2: Type of Equipment Procured and Assigned

Procured Assigned Item No. Year Office No. Desktop Computer 14 2004 GFO, Biratnagar 1 GFO, Lahan 1 GFO, Mahottari 1 GFO, Birgunj 1 DOI, Jawalakhel 1 PMU, Janakpur 9 Laptop Computer 1 2004 PMU, Janakpur 1 LaserJet Printer 1022 13 2004 PMU, Janakpur 13 UPS 14 2004 PMU, Janakpur 14 Photocopier 3 2004 PMU, Janakpur 3 Overhead Projector 5 2004 GFO, Biratnagar 1 GFO, Mahottari 1 PMU, Janakpur 3 Highdried Generating Machine 1 2004 GRDP, Kathmandu 1 Electric Resistivity Meter 5 2003 GFO, Mahottari 1 PMU, Janakpur 4 Levelling Machine 5 2003 PMU, Janakpur 5 Computer 1 2004 DOI, Lalitpur 1 Laptop computer 1 2004 PMU, Janakpur 1 Dizitech Computer 12 2003 GRDP, Babarmahal 2 Canon Printer 12 2003 NRB, Kathmandu 1 UPS and Stabilizer 12 2003 GFO, Mahottari 1 PMU, Janakpur 8 Scanner 1 2000 PMU, Janakpur 1 Fax Machine 3 2000 GFO, Birgunj 1 PMU, Janakpur 2 Photocy Machine (MITA) 2 2000 GRDP, Babarmahal 1 PMU, Janakpur 1 Dell Computer 13 2001 GFO, Biratnagar 1 Laser Printer 13 GFO, Lahan 2 UPS 13 GFO, Mahottari 1 GFO, Birgunj 1 GRDP, Babarmahal 2 NRB, Kathmandu 2 PMU, Janakpur 4 Laptop Computer 2 2000 GRDP, Babarmahal 1 PMU, Janakpur 1 Scanner 1 2000 PMU, Janakpur 1 Photocy Machine (Toshiba) 5 2000 GRDP, Babarmahal 1 NRB, Kathmandu 2 PMU, Janakpur 2 Photocy Machine (Selex) 1 1999 GRDP, Babarmahal 1

GFO = groundwater field office, DOI = Department of Irrigation, PMU = project management unit, GRDP = groundwater resource development project, NRB = Nepal Rastra Bank, UPS = uninterrupted water supply.

26 Appendix 8

PLANNED AND ACTURAL EXPENDITURE BY SOURCE, CATEGORY, AND COMPONENT

Table A8.1: Original and Actual Project Expenditure by Sources ($’ million)

Original Actual Financing Source

Amount

% by Sources

Amount

% by Sources

Actual as % of

Original Asian Development Bank 30.0 70 10.16 57 34 Canadian International Development Agency

2.80 7 3.43 19 122

Government of Nepal 5.35 12 3.23 18 60 Participating Financing Institutions

1.70 4 0.38 2 22

Beneficiaries 2.96 7 0.74 4 25 Total 42.81 100 17.94 100 42

Sources: Loan financial information system, Asian Development Bank; Department of Irrigation. 2008. Borrowers Project Completion Report for the Community Groundwater Irrigation Sector Project. Kathmandu; and Project Completion Review Mission, July 2008.

Table A8.2: Original and Actual Project Expenditure by Cost Category ($’ million)

Category

Original Amount

Actual Amount

Actual as % of Original Cost

Civil Works 12.70 4.50 35 Office Rental 0.26 0.16 61 Vehicles and Equipment 1.15 0.47 41 Training and Workshops 3.86 1.20 31 Provision of Credit 17.0 4.40 26 NGO Services 0.73 1.27 173 Consulting Services 2.08 2.41 116 Incremental Operating Cost 3.70 3.29 81 Service Charge 1.00 0.24 24 Total 42.81 17.94 42

NGO = nongovernment organization Sources: Loan financial information system, Asian Development Bank; Department of Irrigation. 2008. Borrowers Project Completion Report for the Community Groundwater Irrigation Sector Project. Kathmandu; and Project Completion Review Mission, July 2008.

Appendix 9 27

CUMULATIVE, ANNUAL, AND QUARTERLY LOAN DISBSURSEMENTS

Table A9.1: Cumulative Loan Disbursement

($) Category Description 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

01 Civil Works — 50,098 85,332 171,412 210,153 473,818 1,005,238 1,876,803 2,659,718 2,659,718

02 Vehicles and Equipment 186,650 367,634 388,553 388,553 388,553 388,553 388,553 473,225 473,225 473,225

03 Office Rental 12,865 26,633 33,884 43,037 43,037 57,733 61,488 71,612 77,181 77,181

04 Training and Workshops 99,425 134,366 148,471 224,519 237,594 426,516 569,611 766,011 957,743 957,743

05 Provision of Credit 162,358 162,358 196,345 196,345 810,360 1,298,992 1,955,873 2,792,264 3,173,791 3,173,791

06 Incremental Operation

Cost 222,594 360,938 468,269 609,846 737,370 1,144,762 1,504,988 2,154,285 2,491,253 2,577,441

07 Service Charge 2,862 11,806 22,747 35,993 58,213 89,054 132,437 200,465 242,441 242,441

Total 686,754 1,113,833 1,343,601 1,669,705 2,485,280 3,879,428 5,618,188 8,334,665 10,075,352 10,161,540

Source: Loan financial information system, Asian Development Bank.

28 Appendix 9

Table A9.2: Annual Loan Disbursements ($)

Category Description 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Total

01 Civil Works — 50,098 35,234 86,080 38,741 263,665 531,420 871,565 782,915 — 2,659,718

02 Vehicles and Equipment 186,650 180,984 20,919 — — — — 84,672 — — 473,225

03 Office Rental 12,865 13,768 7,251 9,153 — 14,696 3,755 10,124 5,569 — 77,181

04 Training and Workshops 99,425 34,941 14,105 76,048 13,075 188,922 143,095 196,400 191,732 — 957,743

05 Provision of Credit 162,358 — 33,987 — 614,015 488,632 656,881 836,391 381,527 — 3,173,791

06 Incremental Operation Cost

222,594 138,344 107,331 141,577 127,524 407,392 360,226 649,297 336,968 86,188

2,577,441

07 Service Charge 2,862 8,944 10,941 13,246 22,220 30,841 43,383 68,028 41,976 — 242,441

Total 686,754 427,079 229,768 326,104 815,575 1,394,148 1,738,760 2,716,477 1,740,687 86,188

10,161,540

Source: Loan financial information system, Asian Development Bank.

Appendix 9 29

Table A9.3: Quarterly Loan Disbursement ($ million)

Contract Awards Disbursements Year

Quarter Projected Actual Projected Actual

1999 I 0.00 0.00 0.00 0.00 II 0.17 0.00 0.17 0.50 III 0.28 0.23 0.28 0.00 IV 0.35 0.00 0.35 0.19 Subtotal 0.80 0.23 0.80 0.69

2000 I 0.15 0.15 0.15 0.19 II 0.18 0.00 0.18 0.00 III 0.29 0.00 0.20 0.00 IV 0.31 0.22 0.30 0.23 Subtotal 0.93 0.37 0.83 0.43

2001 I 0.18 0.06 0.18 0.06 II 0.26 0.00 0.23 0.01 III 0.25 0.05 0.23 0.05 IV 0.29 0.11 0.27 0.11 Subtotal 0.97 0.22 0.90 0.23

2002 I 0.09 0.00 0.00 0.00 II 0.16 0.31 0.09 0.05 III 0.01 0.00 0.16 0.27 IV 0.05 0.00 0.04 0.01 Subtotal 0.31 0.31 0.29 0.33

2003 I 0.04 0.26 0.04 0.00 II 0.13 0.00 0.13 0.57 III 0.10 0.00 0.10 0.09 IV 0.07 0.13 0.07 0.15 Subtotal 0.34 0.39 0.34 0.82

2004 I 0.26 0.70 0.26 0.14 II 0.48 0.59 0.48 0.43 III 0.47 0.05 0.47 0.18 IV 0.34 0.00 0.34 0.64 Subtotal 1.56 1.34 1.56 1.39

2005 I 0.30 0.26 0.30 0.16 II 0.70 0.79 0.70 0.13 III 0.50 0.33 0.50 0.60 IV 0.50 0.55 0.50 0.86 Subtotal 2.00 1.94 2.00 1.74

2006 I 1.30 0.91 0.78 0.53 II 1.00 0.41 1.95 0.12 III 0.00 0.83 0.00 1.19 IV 0.00 0.31 0.00 0.88 Subtotal 2.30 2.45 2.73 2.72

2007 I 0.40 0.22 0.20 0.00 II 0.60 0.58 0.30 0.04 III 0.00 0.63 0.30 0.30 IV 0.00 1.24 0.00 1.40 Subtotal 1.00 2.66 0.80 1.74

2008 I 0.00 0.00 0.00 0.09 Subtotal 0.00 0.00 0.00 0.09 Total 10.20 9.92 10.24 10.16

Note: Totals may not sum precisely because of rounding. Source: Loan financial information System, Asian Development Bank.

30 Appendix 10

ORIGINAL AND ACTUAL PROJECT IMPLEMENTATION SCHEDULE

Activity/Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 A. STW Installation

1. New subproject (year 1)

2. New subproject (year 2)

3. New subproject (year 3)

4. New subproject (year 4)

5. New subproject (year 5)

6. New subproject (year 6)

7. New subproject (year 7)

8. New subproject (year 8)

B. Farm-to-Market Roads

Improvement of farm-to-market roads (km)

C. Social Facilitation

1. Recruitment of NGOs (Batch I)

2. Recruitment of NGOs (Batch II)

3. Training of SFs

4. Formation of WUGs and WUAs

D. Agricultural Development

1. Training project implementation

2. Plot demonstration

E. Financial Services

1. Number of PFIs fielded

2. Training programs

Appendix 10 31

Activity/Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 F. Procurement of Vehicles and

Equipment' G. Consulting Services

1. Recruitment

2. Service provision

H. MIS and BME 1. BME

2. MIS

BME = benefit and monitoring evaluation, JT = junior technician, MIS = management information system, NGO = nongovernment organization, PFI = participating financing institutions, SF = social facilitator; STW = shallow tubewell; WUA = water user association; WUG = water user group. Source: Project Completion Review Mission, July 2008.

Planned Actual

32 Appendix 11

STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS

No. Covenant Reference in Loan

Agreement

Status of Compliance

1 The borrower shall cause the Project to be carried out with due diligence and efficiency and in conformity with sound administrative, financial, engineering, environmental, irrigation, and agricultural practices.

Article 4, para. 1 (a)

Complied with

2 The Borrower shall make available, promptly as needed, the funds, facilities, services, land, and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project and for the operation and maintenance of the Project Facilities.

Article 4, para. 2 (a)

Complied with

3 The Borrower shall ensure that the Project continues to be designated as a core development project of the Borrower for the purpose of ensuring that the Project receives adequate budgetary support.

Article 4, para. 2 (b)

Complied with

4 In the carrying out of the Project, the Borrower shall cause competent and qualified consultants and contractors, acceptable to the Borrower and the Bank, to be employed to an extent and upon terms and conditions satisfactory to the Borrower and the Bank.

Article 4, para. 3 (a)

Complied with

5 The Borrower shall cause the Project to be carried out in accordance with plans, design standards, specifications, work schedules and construction methods acceptable to the Borrower and the Bank. The Borrower shall furnish, or cause to be furnished, to the Bank, promptly after their preparation such plans, design standards, specifications and work schedules, any material modifications subsequently made therein, in such details as the Bank shall reasonably request.

Article 4, para. 3 (b)

Complied with

6 The Borrower shall ensure that the activities of its departments and agencies with respect to the carrying out of the Project and operation of the Project facilities are conducted and coordinated in accordance with sound administrative policies and procedures.

Article 4, para. 4

Complied with

7 The Borrower shall make arrangements satisfactory to the Bank for insurance of the Project facilities to such extent and against such risks and in such amounts as shall be consistent with sound practice.

Article 4, para. 5 (a)

Complied with

8 Without limiting the generality of the foregoing, the Borrower undertakes to insure, or cause to be insured, the goods to be imported for the Project and to be financed out of the procedures of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance and indemnity shall be payable in a currency freely usable to replace or repair such goods.

Article 4, para. 5 (b)

Complied with

9 The Borrower shall maintain, or cause to be maintained, records and accounts adequate to identify the goods and services and other items of expenditure financed out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, the operation and financial condition of the agencies of the Borrower responsible for the carrying out of the Project and operation of the Project facilities, or any part thereof.

Article 4, para. 6 (a)

Complied with

Appendix 11 33

No. Covenant Reference in Loan

Agreement

Status of Compliance

10 The Borrower shall i) maintain, or cause to be maintained, separate accounts for the Project; ii) have such accounts and related financial statements audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualification, experience and terms of reference are acceptable to the Bank; iii) furnish to the Bank, as soon as available but in any event not later than twelve months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors’ opinion on the use of the Loan proceeds and compliance with the covenants of this Loan Agreement as well as on the use of the procedures for imprest account/statement of expenditures), all in the English language; and iv) furnish to the Bank such other information concerning such accounts and financial statements and the audit thereof as the Bank shall from time to time reasonably request.

Article 4, para. 6 (b)

Complied with

11 The Borrower shall enable the Bank, upon the Bank’s request, to discuss the Borrower’s financial statements for the Project and its financial affairs related to Project from time to time with the Borrower’s auditors, and shall authorize and require any representative of such auditors to participate in any such discussions requested by Bank, provided that any such discussion shall be conducted only in the presence of an authorized officer of the Borrower unless the Borrower shall otherwise agree.

Article 4, para. 6 (b)

Complied with

12 The Borrower shall furnish, or cause to be furnished, to the Bank all such reports and information as the Bank shall reasonably request concerning (i) the Loan, and the expenditure of the proceeds and maintenance of the service thereof; (ii) the goods and services and other items of expenditure financed out of the proceeds of the Loan; (iii) the Project; (iv) the administration, operations and financial condition of the agencies of the Borrower responsible for the carrying out of the Project and operation of the Project facilities, or any part thereof; (v) financial and economic conditions in the territory of the Borrower and the international balance-of-payments position of the Borrower; and (vi) any other matters relating to the purposes of the Loan.

Article 4, para. 7 (a)

Complied with

13 Without limiting the generality of the foregoing, the Borrower shall furnish, or cause to be furnished, to the Bank (i) annual work plans in December of each year for the following year of Project implementation, and (ii) semi-annual reports on the carrying out of the Project and on the operation and management of the Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as the Bank shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the six months under review as compared to the annual work plan, steps taken or proposed to be taken to remedy these problems, and proposed program of activities and expected progress during the following six months.

Article 4, para. 7 (b)

Complied with

14 Promptly after physical completion of the Project, but in any event not later than three months thereafter or such later date as may be agreed for this purpose between the Borrower and the

Article 4, para. 7 (c)

Complied with

34 Appendix 11

No. Covenant Reference in Loan

Agreement

Status of Compliance

the execution and initial operation of the Project, including its cost, the performance by the Borrower of its obligations under this Loan Agreement, the impact of the Project on Project beneficiaries, and the accomplishment of the purposes of the Loan.

15 The Borrower shall enable the Bank’s representatives to inspect the Project, the goods financed out of the proceeds of the Loan, and any relevant records and documents.

Article 4, para. 8

Complied with

16 The Borrower shall ensures that the Project facilities are operated, maintained and repaired in accordance with sound administrative, financial, engineering, environmental, irrigation, agricultural, and maintenance and operational practices.

Article 4, para. 9

Complied with

17 It is the mutual intention of the Borrower and Bank that no other external debt owed a creditor other than the Bank shall have any priority over the Loan by way of a lien on the assets of the Borrower. To that end, the Borrower undertakes (i) that, except as the Bank may otherwise agree, if any lien shall be created on any assets of the Borrower as security for any external debt, such lien will ipso facto equally and ratably secure the payment of the principal of, and service charge and any other charge on, the Loan; and (ii) that the Borrower, in creating or permitting the creation of any such lien, will make express provision to that effect.

Article 4, para 10 (a)

Complied with

18 The following are specified as additional events for suspension of the right of the Borrower to make withdrawals from the Loan Account for the purpose of Section 8.02 (1) of the Loan Regulations: (a) The Borrower shall have failed to eliminate capital cost subsidies for private STW development, and (b) the Borrower shall have (i) revised or amended its policy to eliminate capital cost subsidies for private STW development, or (ii) taken any action which would undermine the policy to eliminate capital cost subsidies for private STW development, without prior consultation with and consent of the Bank.

Article 5, para. 1 (a & b)

Complied with

19 PMU shall include a training subsection headed by a training coordinator, who shall be responsible for the preparation of overall and annual training programs addressing the needs of DOI, PMU, NRB, DOA, PFIs, NGOs, private sector providers, and WUGs.

Schedule 6, para. 3

Complied with

20 The Borrower shall ensure that key Project staff are engaged and retained for the duration of Project implementation, and that such staff shall be transferred only with due cause. The Borrower shall inform the Bank of any transfers of key Project staff in a timely manner.

Schedule 6, para. 5

Complied with

21 The Borrower shall ensure that the Boards acts as the Steering Committee for the Project and meets at least once every six months to address Project issues. The Board shall be responsible for reviewing Project activities at the central level and providing policy guidance.

Schedule 6, para. 6

Complied with

22 At the district level, DACs shall coordinate with and among other Borrower agencies and development programs. DACs shall comprise representatives of DOI, DOA and PFIs, and shall review, appraise and recommend subprojects for

Schedule 6, Para 3.

Complied with

Appendix 11 35

No. Covenant Reference in Loan

Agreement

Status of Compliance

implementation. 23 At village development committee level, the STW subcommittees

of village development committee shall coordinate with and among other Borrower programs, and shall mobilize and register farmers’ interest in STW development. The Borrower shall ensure that a STW subcommittee shall be organized at each participating subproject.

Schedule 6, para. 8

Complied with

24 The Borrower shall establish four MSMTs within three months of the effective date, and not less than an additional four MSMTs within three years of the effective date. The Borrower shall ensure that MSMTs are attached to the groundwater field offices to (i) monitor staff at subproject level, (ii) carry out the feasibility study of subprojects, and (iii) provide interdisciplinary support. Each MSMT shall include (i) a hydrogeologist or an irrigation engineer from DOI as a group leader, (ii) an agriculture subject matter specialist from DOA (seconded to the Project), and (iii) a credit specialist (from NRB). Each MSMT shall be assisted by a community mobilization specialist.

Schedule 6, para. 9

Complied with

25 Subproject facilitation teams shall work with farmers at subproject level, and each subproject facilitation team shall include a (i) social facilitator, (ii) junior technician, and (iii) financial services facilitator. PMU shall establish the subproject facilitation teams and plan their work load as and when needed by the subprojects.

Schedule 6, para 10

Complied with

26 The Borrower shall select subprojects after the completion of the preparation process on the basis of a feasibility study to be prepared by MSMTs and at least 15 applications from WUGs to participate in the Project.

Schedule 6, para. 11

Complied with

27 Except as the Bank may otherwise agree, subprojects shall be appraised by the concerned DAC, and approved by the Project Director on the basis of the following criteria: (i) The potential beneficiaries are willing to form formal WUGs

and WUAs and are willing to contribute at least 10% of the total STW cost in cash, labor or kind, mainly for the construction of irrigation canals. Priority shall be given to farmers with landholdings below 1.0 hectare.

(ii) The average command area of a group STW is at least 4 hectares and that of an individual STW is at least 2.5 hectares, and the soils in the command area are suitable for irrigation development.

(iii) Technical conditions for groundwater development are favorable on the basis of the suitability of the aquifer for STWs, the possibility of drilling into the formation using local technology, and high yield of water for irrigation.

(iv) Both private sector and Borrower support services are available including drilling, pump supply and maintenance, and access to farm inputs, credit and agricultural extension services.

(v) Coordination mechanisms with village development committee’s development programs and programs of other aid agencies have been established and a coordinated community development program has been drafted under the feasibility study

Schedule 6, para. 12

Complied with

36 Appendix 11

No. Covenant Reference in Loan

Agreement

Status of Compliance

(vi) The economic internal rate of return of the subproject is at least 12%

(vii) The subproject is environmentally sound and poses no direct or indirect threat to ecologically sensitive areas or to assets of high historical, archaeological, cultural or aesthetic value.

(viii) The subproject is not financed by other external aid agencies

28 The Borrower shall ensure that DOI will not select or prepare any subproject unless (i) the subproject meets the selection criteria above, (ii) it has been requested by, and is supported by, the beneficiaries it is intended to benefit; and (iii) the projected implementation periods does not extend beyond the Project completion date.

Schedule 6, para. 13

Complied with

29 The Borrower shall ensure that MSMTs formally register STW groups as WUGs upon subproject approval. MSMTs shall observe in the election of officers of WUA including the CBOs, endorse credit applications to be submitted to PFIs, reach agreement with WUGs and WUa on training programs and select initial participants. MSMTs shall assist WUGs in determining the most appropriate location of boreholes, in designing the distribution system, and in the purchasing of drilling services and pumps.

Schedule 6, para. 14

Complied with

30 DOA shall provide staff to implement the agricultural extension services under the Project, including a junior technician for field work at a ratio of one junior technician for two subprojects, and a supervising agriculture subject matter specialist as a member of each of the MSMTs. PMU shall coordinate and support the agricultural field operations, and training programs. Activities shall be linked to ongoing programs of DOA. Skills development training shall be conducted at DOA’s existing training facilities and at private institutions.

Schedule 6, para. 15

Complied with

31 The Borrower shall ensure that no far,-to-market roads are constructed or rehabilitated under the project until and unless the concerned WUA has entered into a written agreement with DOI, satisfactory to the Bank, for the operation and maintenance of such farm-to-market roads.

Schedule 6, para. 16

Complied with

32 The Borrower shall ensure that (i) the concerned WUA forms a road improvement committee to prepare a proposal for road improvement under part B of the Project in consultation with the concerned village development committee; (ii) each WUA makes a written commitment to operate and to maintain the roads completed under the Project; and (iii) each WUA is allocated a budget of about $50,000 for road improvement works. The Borrower shall finance at least 20% of the total cost road improvements and shall cause beneficiaries to contribute at least 10% of the total cost of road improvements.

Schedule 6, para. 17

Complied with

33 The Project shall be implemented on the basis of a participatory and process approach and shall include (i) a participatory monitoring system, (ii) participatory semiannual Project review workshops, (iii) representation of selected WUAs in PMU and (iv) participation of selected WUAs in the annual and midterm reviews of the Project.

Schedule 6, para. 18

Complied with

Appendix 11 37

No. Covenant Reference in Loan

Agreement

Status of Compliance

34 The Borrower shall ensure that the risk of defaults by WUG member are addressed through, among other things, the

Schedule 6, para. 25

Complied with

following: (i) excluding of all other WUG members from further Project support until full repayment by the defaulting WUA member has been achieved, (ii) requiring all sub-borrowers to contribute to the Guarantee Fund, (iii) quarterly payments of interest on borrowed capital, (iv) requiring WUG members to attend continuing awareness programs and workshops, and (v) regular contract of PFIs with sub-borrowers. The Borrower shall ensure that sub- borrowers contribute to the Guarantee Fund (i) an upfront cash payment in an amount equivalent to 5% of the cost of a STW and production credit for each subloan approved by PFIs, and (ii) regular monthly payments of NRs. 50 per hectare (to be prorated according to the landholding size). Except as the Bank shall otherwise agree, the Borrower shall match the amount contributed by each WUG to the Guarantee Fund for a period of about three years and with a ceiling of $50. The Borrower shall ensure that the Guarantee Fund is used to cover defaults on subloans. PMU shall monitor, and the concerned PFI and WUGs shall administer, the Guarantee Fund, until all STW subloans have been fully paid.

35 The Borrower shall ensure that upon full repayment of the subloan, the Guarantee Fund is turned over to the concerned WUG for the maintenance and replacement of pumps.

Schedule 6, para. 26

Complied with

36 The Borrower, the Bank and CIDa shall jointly conduct a midterm review at the end of the third year of Project implementation. The Borrower shall invite representatives of selected WUAs and other stakeholders to participate in the midterm review.

Schedule 6, para. 27

Complied with

37 Project performance monitoring system tools shall include (i) a management information system, and (ii) BME.

Schedule 6, para. 28

Complied with

38 The Borrower, through PMU, shall implement the environmental monitoring plan to be developed under the Project and alert the Bank of any findings which may affect Project design and implementation arrangements.

Schedule 6, para. 33

Complied with

39 The Borrower shall ensure that female social mobilizers, agricultural extension officers, and a gender specialist consultant are retained to assist in Project activities. PMU shall encourage the participation of women in all Project activities, and shall ensure that sufficient gender training is provided to Project staff.

Schedule 6, para. 34

Complied with

40 Prior to the commencement of STW installation and road improvement works, PMU shall ensure that gender issues are discussed with WUGs and WUAs.

Schedule 6, para. 35

Complied with

38 Appendix 12

TECHNICAL ASSISTANCE CONSUTING SERVICES (PERSONS – MONTHS)

Consultant/Expertise Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Total

Economist 2.25 2.00 1.70 1.30 2.30 2.00 2.30 2.83 16.68 Financial Specialist 1.00 0.75 0.50 0.40 0.50 0.80 0.70 4.65 Account Specialist 1.00 0.50 0.50 0.50 0.70 0.50 0.40 0.50 4.60 Environmentalist 3.00 2.20 5.20 Cooperative Specialist 1.00 0.10 1.10 STW Expert 3.00 0.10 0.10 3.20 Marketing Expert 0.50 0.50 Capacity Building Specialist 4.00 1.70 0.30 6.00 Financial Specialist 1.50 0.50 2.00 Participatory Project Management Specialist 8.40 7.00 7.60 7.70 1.80 7.33 39.83 Agricultural Economist 8.60 7.40 7.40 7.50 7.50 7.60 16.00 16.00 78.00 WUA Expert 1.30 20.50 25.90 47.70 Gender Specialist 1.00 0.30 0.80 2.10 NGO Specialist 4.00 1.20 0.60 5.80 Credit Specialist 5.70 6.40 5.00 3.60 20.70 Media Expert 2.00 2.00 Civil Engineer 0.50 0.50 Institutional Expert 1.00 1.00 0.70 2.7 Horticulturist 0.50 0.70 1.20 Hydrogeologist 6.00 1.30 7.30 Mechanical Engineer 3.50 2.00 5.50 Training Specialist 6.50 2.00 8.50 Community Development Specialist 11.80 15.60 1.30 28.70 Agriculturist/Agronomist 46.00 80.5 120.00 85.30 7.90 8.13 7.17 7.30 362.3 Total Consultant Services 119.75 131.45 141.50 109.10 43.60 47.23 33.90 27.33 653.86 Community Mobilizers 80.00 155.00 240.00 506.60 922.60 1,284.00 3,188.2 Grant Total 199.75 286.45 361.50 612.70 966.20 1,331.23 33.90 27.33 3,842.06

NGO = nongovernment organization, STW = shallow tubewell, WUA = water user association. Sources: Canadian International Development Agency; and Project Completion Review Mission, July 2008.

Appendix 13 39

MAJOR CONTRACTS IN ROAD IMPROVEMENT WORKS

District Contractor's Name Subproject Total Contract Cost (NRs)

Jhapa Suraj Nirmanan Sewa Surunga 1,372,049 Jhapa Amar Nirman Sewa Goldhpa 2,047,406 Jhapa Karki Bandhu Construction Dangibari 2,432,160 Jhapa Padam Shree, Khushboo J/V Sharanamati 2,722,097 Jhapa Mangal, Heena, Pravin J/V Pathariya 2,019,104 Jhapa Bandana, Laxmi J/V Gherabari 2,136,618 Jhapa Bartaula, Prasar J/V Dainiya 2,085,745 Morang Saraju Nirmana Sewa Aamgachhi 2,113,481 Morang Khushboo Nirman Sewa Takuwa 1,962,918 Parsa Various Pipra, Rajwada, and

Manaharawa 3,438,084

Jhapa Various WUA Rajgadh Garamuniu, and Topgachhi

1,783,846

Morang Various WUA, Morang, 3,702,071 Sunsari Various WUA, Sunsari, 2,863,949 Jhapa Laxmi, Ujwal and Bandana J/V Rajgadh 2,556,243 Jhapa Mangal, Nautan and Nivil J/V Garamuni 2,660,970 Jhapa Siddhakali Construction Topgachhi 2,871,580 Morang Jaya Mata Di, Bagale J/V Dangihat 2,021,359 Morang Saruja Nirmana Sewa Siswani 2,441,918 Morang RK and Karki Brothers J/V Bayarban 2,409,793 Morang Mit, Bharati J/V Nocha 2,640,737 Morang SR, SH and DNP J/V Sorabhag 2,879,080 Morang Jalpa, Padama Shree and

Joshila J/V Sijuwa 3,048,754

Morang Bartaula, Prasai J/V Amardaha 2,254,985 Sunsari Amar, Ganesh J/V Narsingh 2,330,738 Sunsari Purnalaxmi, Langhali Bidhan J/V Kaptanganj 3,260,081 Sunsari Mehata, Saruja, Sitaula J/V Jalpapur 2,564,039 Sunsari Karki, Bright, Ratna J/V Rajganj 2,908,131 Sunsari Pushpanjali, Gurung, Shah J/V Hariangar 2,755,936 Rauthat Various (Ranjan Nirman Sewa) Kanakpur 1,445,316 Parsa Rauniyar Nirman Sewa Titrauna 2,003,356 Bara Binod Shah Nirman Sewa Kalaiya 1,601,334 Rautahat Ranjan Nirman Sewa Hathiyai 1,196,568 Mahottari Ram Janaki Nirman Sewa Mohattari 2,234,027 Pushpanjali, Pokhrel J/V Bijalpura 2,102,928 Singh and Brothers / Makalu J/V Phulgama 2,151,556 Bandana Bhagawati Nirman

Sewa Dhirapur 2,266,669

Indu Construction Asanpur 1,888,439 Siddhakali Tamkay J/V Gauradaha 1,397,098 Siddhakali, P&P and Purba Khitiz Kohabara 1,609,108 Micro Construction Kumarkhod 2,148,494 Siddhakali Capital J/V Sanischare 1,286,084 Jupitat Construction Haldibari 1,290,937 Siddhakali Construction Shivagunj 1,709,094 Mangalshree, Nautanshree Nitin

J/V Charpane 1,032,322

Mangalshree, Nautanshree Nitin J/V

Taganduba 1,746,147

40 Appendix 13

District Contractor's Name Subproject Total Contract Cost (NRs)

S.R-K&K-Baral-SijalL-Parajuli J/V Darbesha 2,445,812 Jaya Matadi-Bagale Nirman Sewa

J/V Rangeli 2,658,954

Jalpa-Pushpanjali-Dantakali-Mehata J/V

Gautampur 3,200,054

Sitaula-Mani-Joshila-Mahalaxmi J/V

Babiya 3,095,444

Karki-Bandhu-Bull-Dewan-Shivashakti

Dumraha 3,345,207

Maha Saraswati N.S./Bharati Govindapur 3,123,027 Santosh/Pushpa/Saruja Dadha 2,304,114 Karna Rekha Construction Prempur Gonahi 2,310,267 Rautahat Shiva Shankar Construction Bishanpurwa Manpur 2,408,179 Rautahat Shah Nirman Sewa Bhalohiya 2,310,547 Parsa Ranjan Nirman Sewa Biruwa Guthi 2,377,096 Various Uttar Jhitkaiya 2,341,558 Parsa Various Balirampur 2,285,451 Binod/Chha/Kusum/Guj J/V Pattarhatti 2,379,063 Various 2,754,205 Total 108,052,803 Source: Project Completion Review Mission, July 2007.

Appendix 14 41

FINANCIAL AND ECONOMIC ANALYSIS

A. Introduction 1. The Community Groundwater Irrigation Sector Project directly benefited 78,580 farm families by providing year-round irrigation to 54,350 ha of land and increasing agriculture production through 10,870 community shallow tubewells (STWs). These achievements were slightly below the appraisal targets. Average annual net incremental income per farm family in the project area is estimated to have increased by NRs18,315 ($251) against the appraisal target of NRs6,550 ($90). It is estimated that the Project provided 2,830 person-years of employment during implementation and 3,170 person-years of on-farm employment in 2007.11 The Project promoted access to year-round irrigation of marginal and small farmers, including disadvantaged communities and women, who had no access to other sources of irrigation. The Project also promoted the role of women and disadvantaged groups in STWs irrigation development and management. Sixty percent of the water user group and water user association members, and 20% of their executive committee officials, were women, while 16% were from disadvantaged groups. These activities strengthened the role of women and disadvantaged groups in local development and enhanced their social status. B. Main Assumptions of the Financial and Economic Analysis 2. As far as was practical, all quantifiable benefits were included in the financial and economic analysis. The economic reevaluation presented in this report was carried out using the same methodology as applied at project formulation. 1. General Methodology 3. The economic analysis was undertaken in accordance with the Asian Development Bank’s (ADB) guidelines.12 Quantifiable project benefits were evaluated by comparing with and without project situations, and applying actual costs and benefits in the field. These costs and benefits were expressed at 2007 constant prices. Illustrative farm models were developed for the situations with and without the Project, and input and output prices were used for both situations. The analytical procedures were subsequently weighted according to the project period.

2. Economic Life of the Project

4. The assumed economic life of the Project was 17 years from the start of implementation in 1999, including the 8-year project implementation period up until 2007. STWs installed under the Project are assumed to be replaced every seven years. Thus, the net economic life of the Project is considered to be 10 years from the time of completion (2008–2017).

3. Project Costs

5. Costs for civil works, survey and detail designs, procurement of vehicles and equipment, investment in STWs, formation and strengthening of water user groups (WUGs) and water user associations (WUAs), capacity development of stakeholders, training, consulting services, project management, and service charge were taken as costs for financial and economic

11 Estimated by the Project Completion Review Mission, July 2008. 12 ADB. 1997. Guidelines for the Economic Analysis of Projects. Manila.

42 Appendix 14

analysis. The Government and beneficiary contributions were taken from various sources and the figures may vary slightly as a result. The mismatch between ADB’s and the Government’s accounting years also limited accuracy. Nevertheless, due care was taken to be as accurate as possible. ADB, the Canadian International Development Agency (CIDA), private financial institutions (PFIs), and beneficiary contributions were considered as project costs, and the Government contribution was assumed to be a recurrent cost. Actual project expenditure began in 1999 and ended in 2007 and thereafter assumed a constant annual recurrent cost of 5% of the sum total expenditure of the project implementation period.13

4. Economic Prices and Costs 6. All costs and benefits were adjusted to constant 2007 prices using (i) a gross domestic product deflator for all local currency costs and benefits, and (ii) the G-5 manufacturer’s unit value index for all foreign exchange costs. Local values were expressed in dollars at an exchange rate of $1.00=NRs68.45, which was the average of the Government’s exchange rate for 2007. To calculate the net present value and reach a cut-off point for the economic internal rate of return (EIRR), a discount rate of 14% was used. 7. The estimates of economic prices for major traded commodities including both outputs (rice, wheat, and maize) and inputs (urea, diammonium phosphate, and potash), taking into account the quality adjustment, international freight charge for border pricing, and local transport and handling costs in the project area (Tables A14.5 and A14.6). The economic prices of non-traded goods, including labor, were based on financial prices adjusted by the standard conversion factor of 0.9. The local expenditure (in local currency) portion of total costs was also adjusted by the standard conversion factor of 0.9 to estimate the economic value. Transfer payments such as taxes and duties were excluded from economic costs. The financial prices for various farm inputs and outputs and local wage rates were collected during the field survey. No conversion factor was applied for non-traded goods such as manure, planting material, and crop residues. The financial and economic prices used for the analysis are in Table A14.7. C. Project Benefits

1. Quantifiable Benefits

8. During project preparation, the major anticipated benefits included in the analysis were those derived from incremental agriculture production by comparing the situation with and without the Project. An increase in the year-round irrigated area of 54,350 ha, which is 93% of the appraisal target, has resulted in a significant increase in agriculture production, and average net incremental income per household was estimated at NRs18,318, which is almost three times higher than the appraisal target. The increased availability of year-round irrigation motivated farmers to expand cropping area, use improved seeds and technologies, and apply recommended doses of farm inputs, particularly fertilizers. Table A14.1 indicates increases in cropping intensity by 79%, total cropped area by 37,297 ha, and annual incremental income by 278,892 metrics ton (t), all of which exceeded the relevant appraisal targets. The benefits of other project components, such as farm-to-market roads and institutional strengthening, are not quantified and included in the analysis.

13 The sum total of expenditure of the project implementation period (1999–2007) multiplied by 0.05. This amount is

assumed constant for each year until 2017.

Appendix 14 43

9. Farm models of inputs and outputs were developed for major crops with and without the Project based on data collected from the field and secondary sources such as Government publications and status reports.14 There were significant increases in input usage and crop yields. At project completion, the average yield of irrigated paddy was 3.46 t per hectare (t/ha) (2.16 t/ha without the Project), wheat 2.6 t/ha (1.2 t/ha without the Project), maize 2.35 t/ha (1.44 t/ha without the Project), sugarcane 32 t/ha (20 t/ha without the Project), potatoes 12 t/ha (9.7 t/ha without the Project), and vegetables 8.7 t/ha (6.6 t/ha without the Project). The increases were 24%–-117%, against the appraisal target of 25%–50%. At project completion, the incremental outputs were 91,348 t for paddy, 49,250 t for wheat, 14,462 for maize, 61,920 t for sugarcane, 28,842 t for potatoes, 29,249 t for vegetables, and 9,428 t for others (Table A14.1). The total annual incremental farm output of 278,892 t was higher than the appraisal target of 221,300 t. The beneficiary households’ annual net income increased by NRs18,315 compared to the appraisal target of NRs6,550. 2. Unquantifiable Benefits 10. The improvement of 300 km of farm-to-market roads, and construction of 6 causeways, 20 culverts, and 35 river crossings enhanced road conditions in subproject areas and established year-round connectivity to markets. An estimated 2,830 person-years of employment was generated during project implementation and 3,170 person-years of on-farm employment in 2007. Establishing and developing the capacity of water user groups, water user associations, and district water user associations and their assumption of full O&M responsibility of STWs and farm-to-market roads has considerably reduced the burden on the Government exchequer to finance development of surface irrigation in the subproject areas and their routine O&M. This expenditure would otherwise absorb a significant amount of the annual budget allocated for irrigation. The Project also promoted the involvement of women and disadvantaged groups in STW development and management, which has strengthened their roles in local development and resource management, and enhanced their social status. D. Financial Analysis 11. Financial analysis was carried out for each major crop cultivated in the project area. A farm size of 1 ha was assumed for the situation both with and without the Project, reflecting representative cropping intensities and patterns in the project area. Financial costs at 2007 values were derived for each major crop (Tables A14.8 and A14.9). The net crop revenue was then obtained by deducting the production costs from gross production (Tables A14.2 and A14.3). A farm family under the situation with the Project would earn an average incremental net income of NRs18,232 ($250)/ha from paddy and its byproducts. The highest level of incremental income per ha was from spring maize at NRs49,170 ($673), followed by potato at NRs24,220 ($332), vegetable NRs22,672 ($310), sugarcane at NRs21,465 ($294), oilseed at NRs13,610 ($186), and wheat at NRs12,663 ($173). However, with improved access to markets, the area under vegetable cultivation is rapidly increasing. The financial internal rate of return (FIRR) for the Project as a whole was estimated to be 26.6% (Table A14.10) for base case, with a financial benefit-cost ratio of 1.21 and a net present value of NRs5,463,718. E. Economic Analysis

14 Project Completion Review Mission Field Survey, July 2008; Department of Irrigation (DOI). 2008. The Borrower’s

Project Completion Report for the Community Groundwater Irrigation Sector Project. Kathmandu; DOI.2007. Status Report of the Community Groundwater Irrigation Sector Project. Kathmandu.

44 Appendix 14

12. Assuming that the relative prices of major commodities would change over time, four types of farm models in economic terms were derived using 2007 prices and projected future prices in 2010, 2013, and 2017. Economic benefits for 2006–2007 were valued at 2007 prices and for the years 2008–2010 at 2007 prices—all in constant 2004 dollars. For economic analysis, the incremental benefit from agricultural production was worked out following the methodology discussed in para. 11 for the financial analysis and the real cost and benefit values were adjusted by multiplying them by the standard conversion factor of 0.9. The EIRR was estimated at 51.12% for the base case (Table A14.11), which is at the highest point of the 31%–55% range estimated at appraisal. The economic net present value with a 14% discount rate was NRs37,662.466. The main reasons for the higher EIRR were (i) that the total year-round irrigated area almost met the appraisal target, (ii) WUGs were properly operating and maintaining STWs, (iii) overall cropping intensity exceeded the appraisal projections, (iv) the net irrigated cropped area increased to 121,687 ha from 84,390 ha, and (v) annual incremental production was 278,892 t. E. Sensitivity Analysis 13. The economic net present value and EIRR were calculated to ascertain the sensitivity of project benefits to changes in assumptions and parameters projected during project formulation. The first scenario was related to an increase in cost by 10% and a decrease in benefits by 10% (Table A14.12). The analysis shows that the EIRR would be about 47% in both situations. The second scenario was linked to delays in generating benefits. The sensitivity analysis tested for 1-year and 2-years delays in the incremental benefits that led to a decline in EIRR to 39.02% and 30.93%, respectively. The results indicate that the Project is not sensitive and did not suffered significant impacts from delays in its completion.

Appendix 14 45

Table A14:1 Area, Production, and Yield of Crops Without Project and With Project Situations

Without Project With Project (Actual) Incremental Yield Cropping Area Total Production Crop

Yield (t/ha)

Cropping Area (ha)

Total Production

(t)

Yield (t/ha)

Cropping Area (ha)

Total Production

(t) t/ha % ha % t %

Early Paddy 1.80 5,238 9,428 3.51 12,810 44,963 1.71 95.00 7,572 144.60 35,535 376.89 Main Paddy 2.52 47,142 118,798 3.40 51,356 174,610 0.88 34.92 4,214 8.90 55,813 46.98 Wheat 1.20 9,312 11,174 2.60 23,240 60,424 1.40 116.67 13,928 149.60 49,250 440.74 Maize 1.44 2,910 4,190 2.35 7,937 18,652 0.91 63.19 5,027 172.70 14,462 345.11 Sugarcane 20.00 2,328 46,560 32.00 3,390 108,480 12.00 60.00 1,062 45.60 61,920 132.99 Pulses/Legumes 0.40 8,730 3,492 0.76 8,980 6,825 0.36 90.00 250 2.90 3,333 95.44 Oilseeds 0.50 8,148 4,074 0.70 6,522 4,565 0.20 40.00 (1,626) (20.00) 491 12.06 Potatoes 9.70 305 2,959 12.00 2,650 31,800 2.30 23.71 2,345 768.90 28,842 974.87 Vegetables 6.60 277 1,828 8.70 3,572 31,076 2.10 31.82 3,295 1,189.50 29,248 1,599.84 Spring Maize 4.41 1,230 5,424 4.41 1,230 5,424 Total 84,390 202,504 121,687 481,396 36,067 278,892

Total Cropping Area 84,390 121,687 Average yield

increase 62%

Total Command Area 58,200 54,350 Cropping Intensity 145% 224% Cropping intensity

increase 54%

() = negative, ha = hectare, t = metric ton. Sources: Ministry of Agriculture and Cooperatives. 2008. Statistical Information on Nepalese Agriculture. Kathmandu; Department of Irrigation. 2008. Borrower’s Project Completion Report for the Community Groundwater Irrigation Sector Project. Kathmandu; and Project Completion Review Mission, July 2008.

46 Appendix 14

Table A.14.2: Financial and Net Economic Crop Revenue NRs/ha (Constant 2007 NRs) Without Project

Crop Yield

(t/ha) Price

(NRs/t) Gross Revenue

(NRs) Production Cost

(NRs) Net Revenue

(NRs) Total Net Revenue

(NRs/ha) Early Paddy 1.80 11,750 21,150 13,178 7,972 8,553 Early Paddy 1.45 400 581 — 581 Main Paddy 2.52 11,750 29,610 14,642 14,968 15,781 Main Paddy 2.03 400 813 — 813 Wheat 1.20 17,500 21,000 19,650 1,350 1,777 Wheat 1.07 400 427 — 427 Maize 1.44 11,000 15,840 15,788 52 700 Maize 1.08 600 648 — 648 Spring Maize — — — — — — Spring Maize — — — — — — Sugarcane 20.00 1,800 36,000 26,549 9,451 9,451 Pulses/Legumes 0.40 25,000 10,000 8,315 1,685 1,685 Mustard/Oilseed 0.50 35,000 17,500 8,518 8,983 8,983 Potato 9.70 8,000 77,600 60,775 16,825 16,825 Vegetables 6.60 6,000 39,600 21,719 17,881 17,881

Economic Net Crop Revenue per ha (2007 prices in constant 2007 NRs) 2001-2007 Early Paddy 1.8 11,710 21,078 19,550 1,528 2,051 Early Paddy 1.5 360 523 — 523 Main Paddy 2.5 11,710 29,509 21,722 7,787 8,519 Main Paddy 2.0 360 732 — 732 Wheat 1.2 17,096 20,516 21,162 (646) (262) Wheat 1.1 360 384 — 384 Maize 1.4 14,338 20,647 19,356 1,291 1,874 Maize 1.1 540 583 — 583 Spring Maize — — — — — — Spring Maize — — — — — — Sugarcane 20.0 1,620 32,400 33,028 (628) (628) Pulses/Legumes 0.4 22,500 9,000 15,642 (6,642) (6,642) Mustard/Oilseed 0.5 31,500 15,750 10,194 5,556 5,556 Potato 9.7 7,200 69,840 64,024 5,816 5,816 Vegetables 6.6 5,400 35,640 31,866 3,774 3,774

Appendix 14 47

Crop Yield (t/ha)

Price (NRs/t)

Gross Revenue (NRs)

Production Cost (NRs)

Net Revenue (NRs)

Total Net Revenue (NRs/ha)

Economic net crop revenue per ha (2008 prices in constant 2007 NRs) 2008-2012 Early Paddy 1.80 18,400 33,121 20,231 12,890 13,413 Early Paddy 1.45 360 523 — 523 Main Paddy 2.52 18,400 46,369 22,478 23,891 24,623 Main Paddy 2.03 360 732 — 732 Wheat 1.20 20,765 24,918 21,909 3,009 3,393 Wheat 1.07 360 384 — 384 Maize 1.44 16,102 23,187 20,010 3,177 3,761 Maize 1.08 540 583 — 583 Spring Maize — — — — — — Spring Maize — — — — — — Sugarcane 20.00 1,620 32,400 34,763 (2,363) (2,363) Pulses/Legumes 0.40 22,500 9,000 16,276 (7,276) (7,276) Mustard/Oilseed 0.50 31,500 15,750 10,452 5,298 5,298 Potato 9.70 7,200 69,840 65,809 4,031 4,031 Vegetables 6.60 5,400 35,640 35,888 (248) (248) Economic net crop revenue per ha (2013 prices in constant 2007 NRs) 2013-2017 Early Paddy 1.80 14,017 25,230 17,145 8,085 8,608 Early Paddy 1.45 360 523 — 523 Main Paddy 2.52 14,017 35,322 19,050 16,272 17,004 Main Paddy 2.03 360 732 — 732 Wheat 1.20 16,854 20,224 19,254 970 1,355 Wheat 1.07 360 384 — 384 Maize 1.44 14,928 21,496 17,489 4,007 4,591 Maize 1.08 540 583 — 583 Spring Maize — — — — — — Spring Maize — — — — — — Sugarcane 20.00 1,620 32,400 31,098 1,302 1,302 Pulses/Legumes 0.40 22,500 9,000 14,534 (5,534) (5,534) Mustard/Oilseed 0.50 31,500 15,750 7,935 7,815 7,815 Potato 9.70 7,200 69,840 61,841 7,999 7,999 Vegetables 6.60 5,400 35,640 27,766 7,874 7,874

— = not available, () = negative, ha = hectare, NRs = Nepalese rupees; t = metric ton. Sources: Ministry of Agriculture and Cooperatives. 2008. Statistical Information on Nepalese Agriculture. Kathmandu; Department of Irrigation. 2008. Borrower’s Project Completion Report for the Community Groundwater Irrigation Sector Project. Kathmandu; and Project Completion Review Mission, July 2008.

48 Appendix 14

Table A.14.3: Financial and Net Economic Crop Revenue NRs/ha (Constant 2007 NRs) With Project

Crop Yield (t/ha)

Price (NRs/t)

Gross Revenue (NRs)

Production Cost (NRs)

Net Revenue (NRs)

Total Net Revenue (NRs/ha)

Early Paddy 3.51 11,750 41,242.50 23,479.02 17,763.48 18,896.51 Early Paddy 2.83 400 1,133.03 0 1,133.03 Main Paddy 3.40 11,750 39,950.00 23,479.02 16,470.98 17,568.50 Main Paddy 2.74 400 1,097.52 0 1,097.52 Wheat 2.60 17,500 45,500.00 33,762.20 11,737.80 12,663.40 Wheat 2.31 400 925.60 0 925.60 Maize 2.35 11,000 25,850.00 24,264.00 1,586.00 2,643.50 Maize 1.76 600 1,057.50 0 1,057.50 Spring Maize 4.41 18,000 7,938.000 32,194.00 47,186.00 49,170.50 Spring Maize 3.31 600 1,984.50 0 1,984.50 Sugarcane 32.00 1,800 57,600.00 36,135.00 21,465.00 21,465.00 Pulses/Legumes 0.76 25,000 19,000.00 15,139.92 3,860.08 3,860.08 Mustard/Oilseed 0.70 35,000 24,500.00 10,890.00 13,610.00 13,610.00 Potato 12.00 8,000 96,000.00 71,780.00 24,220.00 24,220.00 Vegetables 8.70 6,000 52,200.00 29,527.68 22,672.32 22,672.32

Economic Net Crop Revenue per ha (2007 prices in constant 2007 NRs) 2001-2007 Early Paddy 3.51 11,710.07 41,102.33 31,618.32 9,484.00 10,503.73 Early Paddy 2.83 360.00 1,019.725 0 1,019.72 Main Paddy 3.40 11,710.07 39,814.22 31,618.32 8,195.90 9,183.67 Main Paddy 2.74 360.00 987.77 0 987.76 Wheat 2.60 17,096.28 44,450.33 41,462.42 2,987.90 38,20.94 Wheat 2.31 360.00 833.04 0 833.04 Maize 2.35 14,337.85 33,693.95 31,272.56 2,421.38 3,373.13 Maize 1.76 540.00 951.75 0 951.75 Spring Maize 4.41 16,200.00 71,442.00 38,342.02 33,099.98 34,886.03 Spring Maize 3.31 540.00 1,786.05 0 1,786.05 Sugarcane 32.00 1,620.00 51,840.00 45,271.85 6,568.15 6,568.15 Pulses/Legumes 0.76 22,500.00 17,100.00 20,052.69 (2,952.69) (2,952.69) Mustard/Oilseed 0.70 3,150.00 22,050.00 13,805.35 8,244.64 8,244.64 Potato 12.00 7,200.00 86,400.00 75,988.84 10,411.16 10,411.16 Vegetables 8.70 5,400.00 46,980.00 48,583.24 (1603.24) (1,603.24)

Appendix 14 49

Crop Yield (t/ha)

Price (NRs/t)

Gross Revenue (NRs)

Production Cost (NRs)

Net Revenue (NRs)

Total Net Revenue (NRs/ha)

Economic net crop revenue per ha (2008 prices in constant 2007 NRs) 2008-2012 Early Paddy 3.51 18,400.48 64,585.69 19,437.03 45,148.66 46,168.38 Early Paddy 2.83 360.00 1,019.72 0 1,019.725 Main Paddy 3.40 18,400.48 62,561.63 19,437.03 43,124.60 44,112.37 Main Paddy 2.74 360.00 987.76 0 987.76 Wheat 2.60 20,764.76 53,988.37 21,908.72 32,079.66 32,912.7 Wheat 2.31 360.00 833.04 0 833.04 Maize 2.35 16,102.11 37,839.97 20,009.68 17,830.28 18,782.03 Maize 1.76 540.00 951.75 0 951.75 Spring Maize 4.41 16,200.00 71,442.00 40,568.26 30,873.74 32,659.79 Spring Maize 3.31 540.00 1,786.05 0 1,786.05 Sugarcane 32.00 1,620.00 51,840.00 35,223.26 16,616.74 16,616.74 Pulses/Legumes 0.76 22,500.00 17,100.00 16,906.37 193.63 193.63 Mustard/Oilseed 0.70 31,500.00 22,050.00 11,652.17 10,397.83 10,397.83 Potato 12.00 7,200.00 86,400.00 65,808.73 20,591.27 20,591.27 Vegetables 8.70 5,400.00 46,980.00 35,887.76 11,092.24 11,092.24 Economic net crop revenue per ha (2013 prices in constant 2007 NRs) 2013-17 Early Paddy 3.51 14,016.75 49,198.78 29,011.05 20,187.73 21,207.46 Early Paddy 2.83 360.00 1019.72 0 1,019.72 Main Paddy 3.40 14,016.75 47,656.94 29,011.05 18,645.89 19,633.66 Main Paddy 2.74 360.00 987.76 0 987.76 Wheat 2.60 16,853.61 43,819.39 38,993.35 4,826.04 5,659.08 Wheat 2.31 360.00 833.04 0 833.04 Maize 2.35 14,927.84 35,080.43 28,877.09 6,203.34 7,155.09 Maize 1.76 540.00 951.75 0 951.75 Spring Maize 4.41 16,200.00 71,442.00 35,493.47 35,948.53 37,734.58 Spring Maize 3.31 540.00 1,786.05 0 1,786.05 Sugarcane 32.00 1,620.00 51,840.00 42,702.02 9,137.98 9,137.98 Pulses/Legumes 0.76 22,500.00 17,100.00 18,803.74 (1,703.74) (1,703.74) Mustard/Oilseed 0.70 31,500.00 22,050.00 11,524.71 10,525.29 10,525.29 Potato 12.00 7,200.00 86,400.00 73,002.1 13,397.90 13,397.90 Vegetables 8.70 5,400.00 46,980.00 44,003.41 2,976.59 2,976.59

() = negative, ha = hectare, NRs = Nepalese rupees, t = metric ton.

50 Appendix 14

Table A14.4: Financial Net Incremental Crop Revenue NRs/ha (Constant 2007 NRs)

Crop Yield

(t/ha)

Price

(NRs/t)

Gross Revenue

(NRs)

Production Cost (NRs)

Net Revenue

(NRs)

Total Net Revenue (Rs/ha)

Early Paddy 1.70 — 20,093 10,301 9,791 10,343 Early Paddy 1.40 — 552 — 552 — Main Paddy 0.90 — 10,340 8,837 1,503 1,787 Main Paddy 0.70 — 284 — 284 — Wheat 1.40 — 24,500 14,112 10,388 10,886 Wheat 1.20 — 498 — 498 — Maize 0.90 — 10,010 8,476 1,534 1,944 Maize 0.70 — 410 — 410 — Spring Maize Product 4.40 — 79,380 32,194 47,186 49,171 Spring Maize 3.30 — 1,985 — 1,985 — Sugarcane 12.00 — 21,600 9,586 12,014 12,014 Pulses/Legumes 0.40 — 9,000 6,825 2,175 2,175 Mustard/Oilseed 0.20 — 7,000 2,373 4,628 4,628 Potato 2.30 — 18,400 11,005 7,395 7,395 Vegetables 2.10 — 12,600 7,808 4,792 4,792

Economic Net Incremental Crop Revenue per ha (2007 prices in constant 2007 NRs) 2001-2007 Early Paddy 1.71 — 20,024 12,068 7,956 8,453 Early Paddy 1.38 — 497 — 497 — Main Paddy 0.88 — 10,305 9,896 409 664 Main Paddy 0.71 — 256 — 256 — Wheat 1.40 — 23,935 20,301 3,634 4,083 Wheat 1.25 — 449 — 449 — Maize 0.91 — 13,047 11,917 1,130 1,499 Maize 0.68 — 369 — 369 — Spring Maize Product

4.40 — 71,442 38,342 33,100 34,886

Spring Maize 3.30 — 1,786 — 1,786 — Sugarcane 12.00 — 19,440 12,244 7,196 7,196 Pulses/Legumes 0.36 — 8,100 4,411 3,689 3,689 Mustard/Oilseed 0.20 — 6,300 3,612 2,688 2,688 Potato 2.30 — 16,560 11,965 4,595 4,595 Vegetables 2.10 — 11,340 16,718 (5,378) (5,378) Economic Net Incremental Crop Revenue per ha (2008 prices in constant 2007 NRs) 2008-2012 Early Paddy 1.71 — 31,465 (794) 32,258 32,755 Early Paddy 1.38 — 497 — 497 — Main Paddy 0.88 — 16,192 (3,041) 19,234 19,490 Main Paddy 0.71 — 256 — 256 — Wheat 1.40 — 29,071 — 29,071 29,519 Wheat 1.25 — 449 — 449 — Maize 0.91 — 14,653 — 14,653 15,021 Maize 0.68 — 369 — 369 — Spring Maize Product

4.40 — 71,442 40,568 30,874 32,660

Spring Maize 3.30 — 1,786 — 1,786 — Sugarcane 12.00 — 19,440 460 18,980 18,980 Pulses/Legumes 0.36 — 8,100 630 7,470 7,470 Mustard/Oilseed 0.20 — 6,300 1,200 5,100 5,100 Potato 2.30 — 16,560 — 16,560 16,560 Vegetables 2.10 — 11,340 (1) 11,341 11,341

Appendix 14 51

— = not available, ha = hectare, NRs = Nepalese rupees, t = metric ton. Sources: Ministry of Agriculture and Cooperatives. 2008. Statistical Information on Nepalese Agriculture. Kathmandu; Department of Irrigation. 2008. Borrower’s Project Completion Report for the Community Groundwater Irrigation Sector Project. Kathmandu; and Project Completion Review Mission, July 2008.

Crop Yield

(t/ha)

Price

(NRs/t)

Gross Revenue

(NRs)

Production Cost (NRs)

Net Revenue

(NRs)

Total Net Revenue (Rs/ha)

Economic Net Incremental Crop Revenue per ha (2013 prices in constant 2007 NRs) 2013-2017 Early Paddy 1.71 (4,383.73) 16,078 8,780 7,298 12,599 Early Paddy 1.38 — 497 — 497 — Main Paddy 0.88 (4,383.73) 1,288 6,533 (5,245) 2,629 Main Paddy 0.71 — 256 — 256 — Wheat 1.40 (3,911.15) 18,902 17,085 1,817 4,304 Wheat 1.25 — 449 — 449 — Maize 0.91 (1,174.27) 11,893 8,867 3,026 2,565 Maize 0.68 — 369 — 369 — Spring Maize Product

4.40 16,200 71,442 35,493 35,949 37,735

Spring Maize 3.30 540 1,786 — 1,786 — Sugarcane 12.00 — 19,440 7,939 11,501 7,836 Pulses/Legumes 0.36 — 8,100 2,527 5,573 3,830 Mustard/Oilseed 0.20 — 6,300 1,073 5,227 2,710 Potato 2.30 — 16,560 7,193 9,367 5,399 Vegetables 2.10 — 11,340 8,115 3,225 (4,898)

52 Appendix 14

Table A14.5: Derivation of Economic Prices for Major Tradable Grains

Actual Projected

Crop/Item Unit 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 A. Rice

World Market Price FOBa

Constant 1990 Dollarsb $/t 180.1 191.9 197.6 237.7 205.0 205.0 280.8 523.5 447.9 394.4 384.2 374.2 364.5 355.0 345.8 336.1 326.6

Constant 2007 Dollarsb $/t 159.4 169.9 174.9 210.4 181.4 181.4 248.5 463.4 396.4 349.1 340.0 331.2 322.6 314.2 306.1 297.5 289.1 Less Quality Adjustmentc 30% 47.8 51.0 52.5 63.1 54.4 54.4 74.6 139.0 118.9 104.7 102.0 99.4 96.8 94.3 91.8 89.2 86.7

Quality Adjusted FOB $/t 111.6 118.9 122.4 147.3 127.0 127.0 174.0 324.3 277.5 244.4 238.0 231.8 225.8 220.0 214.3 208.2 202.4 International Freight $/t 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 50.0 Calcutta CIF Price $/t 161.6 168.9 172.4 197.3 177.0 177.0 224.0 374.3 327.5 294.4 288.0 281.8 275.8 270.0 264.3 258.2 252.4 Transport and Handling to Nepal Border (Birgunj) $/t 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0

Nepal Border CIF Price $/t 196.6 203.9 207.4 232.3 212.0 212.0 259.0 409.3 362.5 329.4 323.0 316.8 310.8 305.0 299.3 293.2 287.4 CIF Price in NRs. NRs/t 13,456.3 13,956.8 14,198.5 15,899.1 14,512.3 14,512.3 17,727.0 28,020.0 24,813.8 22,544.8 22,110.6 21,687.7 21,275.8 20,874.5 20,483.7 20,070.9 19,669.8

Freight to and from Mill NRs/t (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) Processing Rate NRs/t 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 0.7 Processing Cost NRs/t (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) (250.0) Freight to Farmgate NRs/t 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0

Economic Farmgate Price NRs/mt 8,934.1 9,259.4 9,416.5 10,521.9 9,620.5 9,620.5 11,710.1 18,400.5 16,316.4 14,841.6 14,559.4 14,284.5 14,016.7 13,755.9 13,501.9 13,233.6 12,972.9

B. Wheat World Market Price FOBe Constant 1990 Dollars $/t 132.2 148.1 146.1 156.9 130.0 130.0 219.5 306.0 271.9 236.6 228.7 221.1 213.8 206.7 199.8 195.7 191.6 Constant 2007 Dollars $/t 117.0 131.1 129.3 138.9 115.1 115.1 194.3 270.8 240.7 209.4 202.5 195.7 189.2 182.9 176.8 173.2 169.6 Less Quality Adjustment 30% 35.1 39.3 38.8 41.7 34.5 34.5 58.3 81.3 72.2 62.8 60.7 58.7 56.8 54.9 53.1 52.0 50.9

Quality Adjusted FOB $/t 81.9 91.8 90.5 97.2 80.5 80.5 136.0 189.6 168.5 146.6 141.7 137.0 132.5 128.0 123.8 121.2 118.7 International Freight $/t 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 Calcutta CIF Price $/t 151.9 161.8 160.5 167.2 150.5 150.5 206.0 259.6 238.5 216.6 211.7 207.0 202.5 198.0 193.8 191.2 188.7

Transport and Handling to Nepal Border (Birgunj) $/t 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 Nepal Border CIF Price $/t 186.9 196.8 195.5 202.2 185.5 185.5 241.0 294.6 273.5 251.6 246.7 242.0 237.5 233.0 228.8 226.2 223.7 CIF Price in NRs. NRs/t 12,793.9 13,468.2 13,383.4 13,841.4 12,700.6 12,700.6 16,496.3 20,164.8 18,718.6 17,221.5 16,887.9 16,565.4 16,253.6 15,952.2 15,660.8 15,484.9 15,312.6 Freight to Farmgate NRs/t 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 Economic Farmgate Price NRs/t 13,393.9 14,068.2 13,983.4 14,441.4 13,300.6 13,300.6 17,096.3 20,764.8 19,318.6 17,821.5 17,487.9 17,165.4 16,853.6 16,552.2 16,260.8 16,084.9 15,912.6

C. Maize World Market Price FOBf Constant 1990 Dollars $/t 97.6 103.6 145.5 108.0 97.9 97.9 140.8 177.2 167.9 157.7 156.1 154.5 153.0 151.4 149.9 143.4 137.1 Constant 2007 Dollars $/t 86.4 91.7 128.8 95.6 86.7 86.7 124.6 156.8 148.6 139.6 138.2 136.8 135.4 134.0 132.7 126.9 121.3 Less Quality Adjustment 20% 17.3 18.3 25.8 19.1 17.3 17.3 24.9 31.4 29.7 27.9 27.6 27.4 27.1 26.8 26.5 25.4 24.3 Quality Adjusted FOB $/t 69.1 73.4 103.0 76.5 69.3 69.3 99.7 125.5 118.9 111.7 110.5 109.4 108.3 107.2 106.1 101.5 97.1 International Freight $/t 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 66.0 Calcutta CIF Price $/t 135.1 139.4 169.0 142.5 135.3 135.3 165.7 191.5 184.9 177.7 176.5 175.4 174.3 173.2 172.1 167.5 163.1 Transport and Handling to Nepal Border (Birgunj) $/t 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 35.0 Nepal Border CIF Price $/t 170.1 174.4 204.0 177.5 170.3 170.3 200.7 226.5 219.9 212.7 211.5 210.4 209.3 208.2 207.1 202.5 198.1 CIF Price in NRs. NRs/t 11,644.0 11,934.8 13,965.7 12,148.1 11,658.5 11,658.5 13,737.9 15,502.1 15,051.4 14,557.0 14,479.8 14,403.4 14,327.8 14,253.0 14,178.9 13,861.6 13,558.1 Freight to Farmgate NRs/t 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 600.0 Economic Farmgate Price NRs/t 12,244.0 12,534.8 14,565.7 12,748.1 12,258.5 12,258.5 14,337.9 16,102.1 15,651.4 15,157.0 15,079.8 15,003.4 14,927.8 14,853.0 14,778.9 14,461.6 14,158.1

Appendix 14 53

CIF = cost, insurance and freight, FOB = free on board, t = metric ton. aThai white, 5% broken, FOB, Bangkok. bConstant 1990 prices are derived from World Bank Commodity Price Projections for 2007 to 2017, and 2020. cQuality adjustment are as per Report and Recommendation of the President. eWheat, U.S., HRW fUS, No.2 Yellow, FOB, Gulf ports Inflation indice(2007/1990), measured by manufacturing unit value index Exchange rate $1 = 68.450 WB MUV (2007) 112.98 MUV Index-2007 0.885 Rice growth rate 2010–2015 0.974 Rice growth rate 2015–2020 0.972 Wheat growth rate 2010–2015 0.967 Wheat growth rate 2015–2020 0.979 Maize growth rate 2010–2015 0.990 Maize growth rate 2015–2020 0.956

Source: Project Completion Review Mission, July 2008

54 Appendix 14

Table A14.6: Derivation of Economic Prices of Fertilizers

Actual Projected

Fertilizer/Item Unit 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 A. Urea World Market Price FOBa Constant 1990 Dollarsb $/t 99.3 94.4 138.9 175.3 122.3 122.3 266.1 342.3 279.9 244.5 234.8 225.5 216.6 208.0 199.8 192.3 185.0 Constant 2007 Dollarsb $/t 87.9 83.6 122.9 155.2 108.2 108.2 235.5 303.0 247.7 216.4 207.8 199.6 191.7 184.1 176.8 170.2 163.8 International Freight $/t 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 Calcutta CIF Price $/t 162.9 158.6 197.9 230.2 183.2 183.2 310.5 378.0 322.7 291.4 282.8 274.6 266.7 259.1 251.8 245.2 238.8

Transport and Handling to Nepal Border (Birganj) $/t 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 Nepal Border CIF Price $/t 224.9 220.6 259.9 292.2 245.2 245.2 372.5 440.0 384.7 353.4 344.8 336.6 328.7 321.1 313.8 307.2 300.8 CIF Price in NRs.c NRs/t 15,393.8 15,097.0 17,793.0 19,998.4 16,787.3 16,787.3 25,499.6 30,116.2 26,335.7 24,190.9 23,604.7 23,041.6 22,500.9 21,981.5 21,482.7 21,026.8 20,588.0 Transport and Handling to Wholesaler NRs/t 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 Wholesaler's Margin 20% 3,228.8 3,169.4 3,708.6 4,149.7 3,507.5 3,507.5 5,249.9 6,173.2 5,417.1 4,988.2 4,870.9 4,758.3 4,650.2 4,546.3 4,446.5 4,355.4 4,267.6 Transport and Handling to Farmgate NRs/t 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0

Retailor's Margin 10% 2,002.3 1,966.6 2,290.2 2,554.8 2,169.5 2,169.5 3,214.9 3,768.9 3,315.3 3,057.9 2,987.6 2,920.0 2,855.1 2,792.8 2,732.9 2,678.2 2,625.6

Economic Farmgate Price NRs/t 22,024.9 21,633.0 25,191.8 28,102.8 23,864.3 23,864.3 35,364.4 41,458.4 36,468.1 33,637.0 32,863.2 32,120.0 31,406.2 30,720.6 30,062.2 29,460.3 28,881.1 B.Diammonium Phosphate

World Market Price FOBd

Constant 1990 Dollars $/t 154.0 157.5 179.4 221.2 170.0 170.0 372.0 724.8 399.9 315.5 298.3 282.0 266.5 252.0 238.2 228.8 219.8

Constant 2007 Dollars $/t 136.3 139.4 158.8 195.8 150.5 150.5 329.3 641.5 354.0 279.3 264.0 249.6 235.9 223.0 210.8 202.5 194.6

International Freight $/t 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0

Calcutta CIF Price $/t 211.3 214.4 233.8 270.8 225.5 225.5 404.3 716.5 429.0 354.3 339.0 324.6 310.9 298.0 285.8 277.5 269.6 Transport and Handling to Nepal Border (Birganj) $/t 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0

Nepal Border CIF Price $/t 273.3 276.4 295.8 332.8 287.5 287.5 466.3 778.5 491.0 416.3 401.0 386.6 372.9 360.0 347.8 339.5 331.6

CIF Price in NRs.c NRs/t 18,707.9 18,919.9 20,246.8 22,779.3 19,677.3 19,677.3 31,915.6 53,290.3 33,606.0 28,492.5 27,447.7 26,460.0 25,526.3 24,643.6 23,809.2 23,241.6 22,696.3 Transport and Handling to Wholesaler NRs/t 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0

Wholesaler's Margin 20% 3,891.6 3,934.0 4,199.4 4,705.9 4,085.5 4,085.5 6,533.1 10,808.1 6,871.2 5,848.5 5,639.5 5,442.0 5,255.3 5,078.7 4,911.8 4,798.3 4,689.3 Transport and Handling to Farmgate NRs/t 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0

Retailor's Margin 10% 2,399.9 2,425.4 2,584.6 2,888.5 2,516.3 2,516.3 3,984.9 6,549.8 4,187.7 3,574.1 3,448.7 3,330.2 3,218.2 3,112.2 3,012.1 2,944.0 2,878.6

Economic Farmgate Price NRs/t 26,399.4 26,679.3 28,430.7 31,773.6 27,679.0 27,679.0 43,833.6 72,048.3 46,064.9 39,315.1 37,936.0 36,632.2 35,399.7 34,234.6 33,133.2 32,383.9 31,664.2

C. Muriate of Potash

World Market Price FOBe

Constant 1990 Dollars $/t 123.1 113.3 113.3 124.6 116.0 116.0 172.2 322.1 287.9 228.7 219.1 209.9 201.1 192.6 184.5 177.0 169.8

Constant 2004 Dollars $/t 109.0 100.3 100.3 110.3 102.7 102.7 152.4 285.1 254.8 202.4 193.9 185.8 178.0 170.5 163.3 156.7 150.3

International Freight $/t 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0 75.0

Calcutta CIF Price $/t 184.0 175.3 175.3 185.3 177.7 177.7 227.4 360.1 329.8 277.4 268.9 260.8 253.0 245.5 238.3 231.7 225.3 Transport and Handling to Nepal Border (Birganj) $/t 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0 62.0

Nepal Border CIF Price $/mt 246.0 237.3 237.3 247.3 239.7 239.7 289.4 422.1 391.8 339.4 330.9 322.8 315.0 307.5 300.3 293.7 287.3

CIF price in NRs.c NRs/t 16,835.8 16,242.0 16,242.0 16,926.7 16,405.6 16,405.6 19,810.5 28,892.4 26,820.3 23,233.7 22,651.1 22,093.1 21,558.5 21,046.3 20,555.8 20,101.0 19,664.7

Appendix 14 55

Actual Projected

Fertilizer/Item Unit 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Transport and Handling to Wholesaler NRs/t 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0 750.0

Wholesaler's Margin 20% 3,517.2 3,398.4 3,398.4 3,535.3 3,431.1 3,431.1 4,112.1 5,928.5 5,514.1 4,796.7 4,680.2 4,568.6 4,461.7 4,359.3 4,261.2 4,170.2 4,082.9 Transport and Handling to Farmgate NRs/t 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0 650.0

Retailor's Margin 10% 2,175.3 2,104.0 2,104.0 2,186.2 2,123.7 2,123.7 2,532.3 3,622.1 3,373.4 2,943.0 2,873.1 2,806.2 2,742.0 2,680.6 2,621.7 2,567.1 2,514.8

Economic Farmgate Price NRs/t 23,928.2 23,144.5 23,144.5 24,048.2 23,360.4 23,360.4 27,854.9 39,842.9 37,107.9 32,373.4 31,604.5 30,867.8 30,162.2 29,486.2 28,838.6 28,238.3 27,662.4

CIF = cost, insurance and freight , FOB = free on board, t = metric tons. aBulk, FOB, East Europe. bConstant 1990 prices are derived from World Bank Commodity Price Projections (see FOB/for rice). cBulk spot, FOB, US Gulf. dStandard grade, spot, FOB, Vancouver. Inflation indice(2004/1990), measured by manufacturing unit value index. Inflation indice(2007/1990), measured by manufacturing unit value (MUV) index. Exchange rate $1 = 68.45 WB MUV (2007) 112.98 MUV Index-2007 0.88 Urea growth rate 2010–2015 0.96 Urea growth rate 2015–2020 0.96 DAP growth rate 2010–2015 0.94 DAP growth rate 2015–2020 0.96 Potash growth rate 2010–2015 0.96 Potash growth rate 2015–2020 0.96

Source: Project Completion Review Mission, July 2008

56 Appendix 14

Table A14.7: Summary of Financial and Economic Prices of Major Outputs and Inputs (Constant 2007 NRs)

Economic Price (Constant 2007)b Actual Projected Outputs/Inputs Unit

Fina-ncial Price 2007 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

A. Outputs

Early Paddy NRs/kg 11.75 8.93 9.26 9.42 10.52 9.62 9.62 11.71 18.40 16.32 14.84 14.56 14.28 14.02 13.76 13.50 13.23 12.97

Early Paddy NRs/kg 0.40 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36

Main Paddy NRs/kg 11.75 8.93 9.26 9.42 10.52 9.62 9.62 11.71 18.40 16.32 14.84 14.56 14.28 14.02 13.76 13.50 13.23 12.97

Main Paddy NRs/kg 0.40 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36

Wheat NRs/kg 17.50 13.39 14.07 13.98 14.44 13.30 13.30 17.10 20.76 19.32 17.82 17.49 17.17 16.85 16.55 16.26 16.08 15.91

Wheat NRs/kg 0.40 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36

Maize NRs/kg 11.00 12.24 12.53 14.57 12.75 12.26 12.26 14.34 16.10 15.65 15.16 15.08 15.00 14.93 14.85 14.78 14.46 14.16

Maize NRs/kg 0.60 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54

Spring Maize NRs/kg 18.00 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20

Spring Maize NRs/kg 0.60 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54 0.54

Sugarcane NRs/kg 1.80 1.62 1.62 1.62 1.62 1.62 1.62 1.62 1.62 1.62 1.62 1.62 1.62 1.62 1.62 1.62 1.62 1.62

Pulses/Legumes NRs/kg 25.00 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50

Mustard/Oilseed NRs/kg 35.00 31.50 31.50 31.50 31.50 31.50 31.50 31.50 31.50 31.50 31.50 31.50 31.50 31.50 31.50 31.50 31.50 31.50

Potato NRs/kg 8.00 7.20 7.20 7.20 7.20 7.20 7.20 7.20 7.20 7.20 7.20 7.20 7.20 7.20 7.20 7.20 7.20 7.20

Vegetables NRs/kg 6.00 5.40 5.40 5.40 5.40 5.40 5.40 5.40 5.40 5.40 5.40 5.40 5.40 5.40 5.40 5.40 5.40 5.40

B. Inputs

1. Seed/Materials

Early Paddy NRs/kg 19.00 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10

Main Paddy NRs/kg 19.00 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10 17.10

Wheat NRs/kg 25.00 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50 22.50

Maize NRs/kg 18.00 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20 16.20

Spring Maize NRs/kg 150.0

0 135.00 135.00 135.00 135.00 135.00 135.00 135.00 135.0

0 135.00 135.00 135.00 135.00 135.00 135.00 135.00 135.00 135.00

Sugarcane NRs/kg 2.00 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80 1.80

Lentil/Pulses NRs/kg 55.00 49.50 49.50 49.50 49.50 49.50 49.50 49.50 49.50 49.50 49.50 49.50 49.50 49.50 49.50 49.50 49.50 49.50

Mustard/ Oilseed NRs/kg 45.00 40.50 40.50 40.50 40.50 40.50 40.50 40.50 40.50 40.50 40.50 40.50 40.50 40.50 40.50 40.50 40.50 40.50

Potato NRs/kg 40.00 36.00 36.00 36.00 36.00 36.00 36.00 36.00 36.00 36.00 36.00 36.00 36.00 36.00 36.00 36.00 36.00 36.00

Vegetables NRs/kg 8500.0

0 7,650.00 7,650.00 7,650.00 7,650.00 7,650.00 7,650.00 7,650.00 7,650.0

0 7,650.00 7,650.00 7,650.00 7,650.00 7,650.00 7,650.00 7,650.00 7,650.00 7,650.00

2. Fertilizers

Urea NRs/kg 28.00 22.02 21.63 25.19 28.10 23.86 23.86 35.36 41.46 36.47 33.64 32.86 32.12 31.41 30.72 30.06 29.46 28.88

DAP NRs/kg 35.00 26.40 26.68 28.43 31.77 27.68 27.68 43.83 72.05 46.06 39.32 37.94 36.63 35.40 34.23 33.13 32.38 31.66

Potash NRs/kg 20.00 23.93 23.14 23.14 24.05 23.36 23.36 27.85 39.84 37.11 32.37 31.60 30.87 30.16 29.49 28.84 28.24 27.66

Farmyard Manure NRs/kg 0.40 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36 0.36

C. Labor

Farm Laborc NRs/PD 130.0

0 117.00 117.00 117.00 117.00 117.00 117.00 117.00 117.0

0 117.00 117.00 117.00 117.00 117.00 117.00 117.00 117.00 117.00

Appendix 14 57

Economic Price (Constant 2007)b Actual Projected Outputs/Inputs Unit

Fina-ncial Price 2007 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Draft Animal (Bullock)d NRs/BD 280.0

0 252.00 252.00 252.00 252.00 252.00 252.00 252.00 252.0

0 252.00 252.00 252.00 252.00 252.00 252.00 252.00 252.00 252.00 D. Machine

Tractor use NRs/hr 700.0

0 630.00 630.00 630.00 630.00 630.00 630.00 630.00 630.0

0 630.00 630.00 630.00 630.00 630.00 630.00 630.00 630.00 630.00

Thresher use NRs/hr 750.0

0 675.00 675.00 675.00 675.00 675.00 675.00 675.00 675.0

0 675.00 675.00 675.00 675.00 675.00 675.00 675.00 675.00 675.00

STW use NRs/hr 80.00 72.00 72.00 72.00 72.00 72.00 72.00 72.00 72.00 72.00 72.00 72.00 72.00 72.00 72.00 72.00 72.00 72.00 BD = bullock-days, DAP = diammonium phosphate, hr = hour, kg = kilogram, PD = person-day. aFinancial prices adjusted to 2007 levels. bEconomic prices for major traded commodities derived from the World Bank commodity price projections. Economic prices for non-traded goods, labor, and other costs were based on local financial prices and adjusted by the standard conversion factor of 0.9. cEconomic prices for labor computed assuming standard conversion factor 0.9. dIncluding operator's cost. Source: Project Completion Review Mission, July 2008

58 Appendix 14

Table A14.8: Farm Model of Inputs per ha: Financial Costs with Project (Physical Inputs and Production Costs, 2007 Prices)

Paddy Wheat Maize Sugarcane

Item Unit Qty Price Total Qty Price Total Qty Price Total Qty Price Total Seed kg 60.0 19.0 1,140.0 160.0 25.0 4,000.0 28.0 18.0 504.0 3,000.0 2.0 6,000.0 DAP kg 60.0 35.0 2,100.0 55.0 35.0 1,925.0 48.0 35.0 1,680.0 118.0 35.0 4,130.0 Urea kg 70.0 28.0 1,960.0 90.0 28.0 2,520.0 40.0 28.0 1,120.0 120.0 28.0 3,360.0 Potash kg 20.0 20.0 400.0 60.0 20.0 1,200.0 25.0 20.0 500.0 50.0 20.0 1,000.0 Manure/Nutrient kg 600.0 0.4 240.0 — 0.4 — — 0.4 — 400.0 0.4 160.0 Insecticides NRs — — 588.2 — — — — — — — — 2,225.0 STW hour 19.1 80.0 1,529.6 60.0 80.0 4,800.0 60.0 80.0 4,800.0 8.0 80.0 640.0 Labor-Hired MD 60.0 130.0 7,800.0 42.0 130.0 5,460.0 58.0 130.0 7,540.0 70.0 130.0 9,100.0 Labor-Family MD 85.0 — — 76.0 — — 70.0 — — 80.0 — — Bullocks PD 16.0 280.0 4,480.0 13.2 280.0 3,707.2 14.0 280.0 3,920.0 9.0 280.0 2,520.0 Tractor use hr 3.0 700.0 2,100.0 7.0 700.0 4,900.0 6.0 700.0 4,200.0 10.0 700.0 7,000.0 Thresher use hr 5.0 750.0 3,750.0 7.0 750.0 5,250.0 — 750.0 — — 750.0 — Total cost 26,087.8 33,762.2 24,264.0 36,135.0

Pulses/Legumes Oil Seeds Potato Vegetables Item Unit Qty Price Total Qty Price Total Qty Price Total Qty Price Total Seed kg 32.0 55.0 1,760.0 12.0 45.0 540.0 1,200.0 40.0 48,000.0 0.3 8,500.0 2,125.0 DAP kg 20.0 35.0 700.0 10.0 35.0 350.0 80.0 35.0 2,800.0 125.0 35.0 4,375.0 Urea kg 40.0 28.0 1,120.0 15.0 28.0 420.0 90.0 28.0 2,520.0 147.1 28.0 4,117.7 Potash kg 10.0 20.0 199.9 10.0 20.0 200.0 30.0 20.0 600.0 70.0 20.0 1,400.0 Manure/Nutrient kg — 0.4 2,500.0 150.0 0.4 60.0 — 0.4 — — 0.4 — Insecticides NRs — — 1,600.0 — — 1,200.0 — — 1,500.0 — — 1,470.0 STW hr 15.0 80.0 1,200.0 8.0 80.0 640.0 12.0 80.0 960.0 30.0 80.0 2,400.0 Labor-Hired MD 10.0 130.0 1,300.0 15.0 130.0 1,950.0 70.0 130.0 9,100.0 65.0 100.0 6,500.0 Labor-Family MD 45.0 — — 30.0 — — 75.0 — — 140.0 — — Bullocks PD 7.0 280.0 1,960.0 16.0 280.0 4,480.0 15.0 280.0 4,200.0 23.0 280.0 6,440.0 Tractor use hr 4.0 700.0 2,800.0 1.5 700.0 1,050.0 3.0 700.0 2,100.0 1.0 700.0 700.0 Thresher use hr — 750.0 — — 750.0 — — 750.0 — — 750.0 — Total cost 15,139.9 10,890.0 71,780.0 29,527.7

Spring Maize

Item Unit Qty Price Total Seed kg 28.0 150.0 4,200.0 DAP kg 48.0 35.0 1,680.0 Urea kg 88.0 28.0 2,464.0 Potash kg 28.0 20.0 560.0 Manure/Nutrient kg — 0.4 — Insecticides NRs — — 650.0 STW hr 47.0 80.0 3,760.0 Labor-Hired MD 65.0 130.0 8,450.0 Labor-Family MD 70.0 — — Bullocks PD 16.0 280.0 4,480.0 Tractor use hr 8.5 700.0 5,950.0 Thresher use hr — 750.0 — Total Cost 32,194.0 — = not available, DAP = diammonium phosphate, Qty = quantity. Source: Project Completion Review Mission, July 2008

Appendix 14 59

Table A14.9: Farm Model of Inputs per ha: Financial Costs without Project (Physical Inputs and Production Costs, 2007 Prices)

Paddy Wheat Maize Sugarcane

Item Unit Qty Price Total Qty Price Total Qty Price Total Qty Price Total

Seed kg 58.0 19.0 1,102.0 140.0 25.0 3,500.0 26.5 18.0 476.5 2,500.0 2.0 5,000.0

DAP kg 15.0 35.0 525.0 20.0 35.0 700.0 18.0 35.0 630.0 40.0 35.0 1,400.0

Urea kg 35.0 28.0 980.0 30.0 28.0 840.0 24.0 28.0 672.0 70.0 28.0 1,960.0

Potash kg 10.0 20.0 200.0 20.0 — — 20.0 — 15.0 20.0 300.0

Manure/Nutrient kg 550.0 0.4 220.0 — 0.4 — — 0.4 — — 0.4 —

Insecticides NRs — — — — — — — — 1,764.7

STW hour — 80.0 — — 80.0 — — 80.0 — — 80.0 —

Labor-Hired PD 45.0 130.0 5,850.0 25.0 130.0 3,250.0 55.0 130.0 7,150.0 55.0 130.0 7,150.0

Labor-Family PD 55.0 — — 25.0 — — 40.0 — — 65.0 — —

Bullocks PD 18.0 280.0 5,040.0 12.0 280.0 3,360.0 12.0 280.0 3,360.0 10.0 280.0 2,800.0

Tractor use hr 0.5 700.0 350.0 5.0 700.0 3,500.0 5.0 700.0 3,500.0 8.8 700.0 6,174.0

Thresher use hr 0.5 750.0 375.0 6.0 750.0 4,500.0 — 750.0 — — 750.0 —

Total Cost 14,642.0 19,650.0 15,788.5 26,548.7 — = not available, DAP = diammonium phosphate, hr = hour, kg = kilogram, PD = person-day, STW = shallow tubewell, Qty = quantity. Source: Project Completion Review Mission, July 2008

60 Appendix 14

Table A.14.10: Financial Cash Flow Analysis ($)

Year Fiscal Year Investment Replacement

Cost O&M Cost Total Cost Net Crop Benefit Net Benefit

Discounted Cost at 14%

Discounted Benefit at

14%

Discounted Net

Benefits a b c d=(a+b+c) e f=(e-d) g h i=(h-g)

1 2001 2,372,305 32,011 2,404,316 75,891 (2,328,425) 2,109,049 66,571 (2,042,478) 2 2002 575,779 179,342 755,122 425,175 (329,946) 581,042 327,158 (253,883) 3 2003 1,440,005 386,454 1,826,459 916,184 (910,274) 1,232,808 618,398 (614,409) 4 2004 2,461,552 899,412 3,360,965 2,132,278 (1,228,686) 1,989,961 1,262,480 (727,481) 5 2005 3,070,010 1,769,899 4,839,909 4,195,980 (643,929) 2,513,697 2,179,260 (334,436) 6 2006 4,796,299 2,699,780 7,496,079 6,400,493 (1,095,586) 3,415,113 2,915,978 (499,134) 7 2007 3,073,413 56,629 4,192,374 7,322,415 9,939,051 2,616,635 2,926,310 3,972,015 1,045,705 8 2008 152,176 260,630 4,192,374 4,605,180 9,939,051 5,333,870 1,614,387 3,484,224 1,869,836 9 2009 366,383 4,192,374 4,558,757 9,939,051 5,380,293 1,401,854 3,056,337 1,654,483

10 2010 907,431 4,192,374 5,099,805 9,939,051 4,839,246 1,375,640 2,680,997 1,305,356 11 2011 1,539,904 4,192,374 5,732,277 9,939,051 4,206,773 1,356,356 2,351,752 995,395 12 2012 1,644,975 4,192,374 5,837,348 9,939,051 4,101,702 1,211,594 2,062,940 851,345 13 2013 2,640,420 4,192,374 6,832,793 9,939,051 3,106,257 1,244,042 1,809,597 565,554 14 2014 2,640,420 4,192,374 6,832,793 9,939,051 3,106,257 1,091,265 1,587,365 496,100 15 2015 2,640,420 4,192,374 6,832,793 9,939,051 3,106,257 957,250 1,392,426 435,175 16 2016 2,640,420 4,192,374 6,832,793 9,939,051 3,106,257 839,693 1,221,426 381,733 17 2017 2,640,420 4,192,374 6,832,793 9,939,051 3,106,257 736,573 1,071,426 334,853

Total 17,941,540 17,978,053 52,083,015 88,002,607 123,475,570 35,472,962 26,596,641 32,060,358 5,463,717 NPV at 14% 5,463,717 FCBR at 14% 1.2 FIRR 26.6% () = minus, FCBR = financial cost-benefit ratio, FIRR = financial international rate of return, NPV = net present value, O&M = operation and maintenance. Source: Project Completion Review Mission, July 2008.

Appendix 14 61

Table A.14.11: Economic Cash Flow Analysis ($)

Year Fiscal Year Investment

Replacement Cost O&M Cost Total Cost

Net Crop Benefit Net Benefit

Discounted Cost at 14%

Discounted Benefit at

14% Discounted Net

Benefits a b C d=(a+b+c) E f=(e-d) g h i=(h-g) 1 2001 2,239,277 28,811 2,268,088 40,170 (2,227,917) 1,989,550 35,237 (1,954,314) 2 2002 543,493 161,408 704,901 225,050 (479,851) 542,398 173,168 (369,230) 3 2003 1,359,256 347,809 1,707,065 484,946 (1,222,120) 1,152,221 327,324 (824,896) 4 2004 2,323,520 809,471 3,132,991 1,128,636 (2,004,355) 1,854,982 668,243 (1,186,739) 5 2005 2,897,858 1,592,909 4,490,768 2,220,973 (2,269,794) 2,332,364 1,153,504 (1,178,860) 6 2006 4,527,344 2,429,803 6,957,147 3,387,843 (3,569,304) 3,169,583 1,543,456 (1,626,127) 7 2007 2,901,070 50,966 3,773,137 6,725,173 5,260,837 (1,464,336) 2,687,630 2,102,427 (585,203) 8 2008 143,643 234,568 3,773,137 4,151,347 36,782,138 32,630,791 1,455,292 12,894,312 11,439,019 9 2009 329,745 3,773,137 4,102,882 36,782,138 32,679,256 1,261,669 11,310,800 10,049,131 10 2010 816,688 3,773,137 4,589,825 36,782,138 32,192,314 1,238,077 9,921,754 8,683,677 11 2011 1,385,913 3,773,137 5,159,050 36,782,138 31,623,088 1,220,721 8,703,293 7,482,572 12 2012 1,480,477 3,773,137 5,253,614 36,782,138 31,528,524 1,090,435 7,634,468 6,544,032 13 2013 2,376,378 3,773,137 6,149,514 7,818,694 1,669,180 1,119,638 1,423,545 303,907 14 2014 2,376,378 3,773,137 6,149,514 7,818,694 1,669,180 982,139 1,248,724 266,585 15 2015 2,376,378 3,773,137 6,149,514 7,818,694 1,669,180 861,525 1,095,372 233,846 16 2016 2,376,378 3,773,137 6,149,514 7,818,694 1,669,180 755,724 960,852 205,128 17 2017 2,376,378 3,773,137 6,149,514 7,818,694 1,669,180 662,916 842,853 179,937 Total 16,935,461 16,180,247 46,874,714 79,990,423 235,752,617 155,762,195 24,376,865 62,039,330 37,662,466 ENPV at 14% 37,662,466 ECBR at 14% 2.55 EIRR 51.12% () = minus, ECBR = economic cost-benefit ratio, EIRR = economic internal rate of return, ENPV = economic net present value, O&M = operation and maintenance. Source: Project Completion Review Mission, July 2008.

62 Appendix 14

Table A.14.12: Financial and Economic Sensitivity Analysis

S.No. Parameters NPV (14% rate) (NRs) BCR (14% rate) IRR (%)

I Financial Analysis Base case 5,463,718 1.21 26.64% Cost increased by 10% 2,804,053 1.10 20.43% Benefit decreased by 10% 2,257,682 1.08 19.75% Benefit delayed by 1 yr 586,633 1.02 15.09% Benefit delayed by 2 yrs (3,334,564) 0.87 8.59%

II Economic Analysis Base case 37,662,466 2.55 51.12% Cost increased by 10% 35,224,779 2.31 47.64% Benefit decreased by 10% 31,458,533 2.29 47.28% Benefit delayed by 1 yr 29,304,256 2.20 39.02% Benefit delayed by 2 yrs 21,972,493 1.90 30.93%

() = negative, BCR = benefit-cost ratio, IRR = internal rate of return, NPV = net present value. Source: Project Completion Review Mission, July 2008